The 2020 Tokyo Olympics were postponed Tuesday, making the Games the biggest global event to be affected by the coronavirus pandemic.
As the disease continues to spread, many companies and organizations have had to cancel or postpone major events in cities around the world. That has led to increased interest in epidemic insurance.
“We definitely do see rising demand in the wake of the coronavirus outbreak,” said Axel Rakette, a spokesperson for insurer Munich Re. “But it’s not a common product — yet.”
Events are typically protected by insurance policies in the event of a cancellation. But most standard policies don’t cover cancellations caused by communicable diseases and outbreaks. Insurers offer restricted coverage for epidemics or pandemics as a buy-back, which means a higher premium, so most companies don’t opt to purchase it.
Munich Re, one of several insurers of the Tokyo Olympics, set up a global team three years ago with “deep expertise in epidemiology, statistics, risk modeling, finance and claims management” and developed a number of different options for companies, Rakette told NBC News.
“Evidence suggests that outbreaks are occurring with ever greater frequency,” Rakette said.
Demand for this type of coverage was so limited before the outbreak, that Munich Re doesn’t anticipate significant exposure related to payouts. While more companies are starting to inquire about this coverage, any new plans they purchase will exclude coverage for the current coronavirus outbreak.
If the disease continues to spread, companies without existing epidemic coverage will likely be exposed and impacted, according to Paul Isaac, a partner at MDD Forensic Accountants, which specializes in quantifying damage.
“Events are more than simply ticket sales or corporate entertainment packages,” Isaac said. “Generally, attendees travel globally to the venues/host countries, meaning the impact is felt from airlines, hotels, tourist attractions and throughout the wider economy.”
“Large events may be protected by such insurance cover — possibly having learned the lessons from the SARS outbreak 18 years ago — but many smaller events may not.”
The impact of postponements or cancellations could be a lack of increased revenue for a city or it could be an actual loss of revenue if facilities and attractions were specifically built for the event.
“How far the ripple effect reaches will become apparent once the full impact of the coronavirus has worked itself through the business world,” Isaac said.