The global spread of coronavirus has led to deferments and cancellations of major 2020 sport events around the globe. Most sport events are not covered for losses arising as a result of pandemics, but coronavirus will bring demand for this type of niche insurance out of the shadows.
The Premier League, the Tokyo Olympics, Wimbledon, The Open, and the Tour de France are examples of major events that have been affected by the coronavirus outbreak. Wimbledon, which has been cancelled for the first time since World War II, stands out as one of the few sporting events to have pandemic insurance in place. According to GlobalData’s SportCal research, Wimbledon generates around $160m in media rights, $151m in sponsorship, and around $52m in ticket sales annually.
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The Wimbledon organiser has paid around £1.5m ($1.87m) per year in pandemic insurance since it took notice of the SARS outbreak in 2003. The organiser has paid out roughly £25.5m over the 17-year period and is set to recover around £114m. However, this amount will make up for around half of the losses resulting from coronavirus. Despite this, Wimbledon will be able to limit the damages because of its insurance coverage, placing it in a much stronger position than most other events in the world during this difficult period.
In the events industry, uptake of pandemic insurance is low. Many organisers have been discouraged to buy this type of insurance, owing to its high cost and the low recurrence of pandemics as devastating as the 1918 Spanish flu. Furthermore, many insurers applied exclusions to standard commercial policies for losses caused by pandemics following the 2003 SARS outbreak, which infected around 8,000 individuals mostly in Asia, making pandemic coverage scarcer. While the extent of losses resulting from coronavirus is still not fully understood, the pandemic will lead event organisers to rethink their crisis strategies.
The unprecedented disruption to events, and the significant payout to Wimbledon, will encourage event organisers around the world to consider investing in this product in the future, particularly with events attracting the largest revenues. The rise in demand could shift pandemic insurance from being a niche product to a core one for sports and other event industries such as music and festivals. Meanwhile, insurers will face challenges in pricing premiums due to a sharp rise in popularity and the significant level of risk attached to the product.
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By GlobalData
