This year, Wimbledon is once again hitting the headlines – not just for 'The Greatest Championships’, a digital recreation that replaces this year's cancelled tournament, but also for its pandemic-savvy approach to insurance.
Wimbledon is one of just a few sporting events to have the benefit of pandemic coverage in its policy. With insurers due to issue a substantial cheque to the organisers to ease the financial burden of cancelling the tournament, let’s look at how its organisers have taken the lead insurance-wise, and what the future might hold for event insurance.
Wimbledon's pandemic coverage
The All England Lawn Tennis Club (AELTC) - the governing body that organises the competition - is expecting to receive £114m from its insurer after it was cancelled at the start of April 2020.
It's estimated that AELTC will recoup almost half of its losses incurred from cancelling the event under pandemic insurance it has purchased every year for the last 17 years, which was prompted by the SARS outbreak in 2003.
Over that 17-year period, AELTC has paid roughly £25.5m for pandemic coverage - and is now set to recover around £114m from insurers. So it seems the investment has paid off.
Wimbledon is the only one of the four tennis Grand Slams to have pandemic insurance. Although the payout won't cover all of its losses, it still puts it in a stronger position than most other elite sporting events.
By contrast, officials from the French Open reported that they could lose £230 million if their tournament is not played this year; and have rescheduled it for September 2020. Royal & Ancient, which oversees the British Open golf championship, also reportedly has pandemic insurance, which will limit some of the financial losses from cancellation of this year’s British Open, set to be held from July 16-19.
What does this mean for other event organisers?
The most pressing issue is whether or not pandemic cover will be available in the future and, if so, at what cost. Here are some key issues for the events industry to consider:
- Insurers are wary of the significant potential costs of protecting against pandemics. Some insurance experts predict that in the not-so-distant future, pandemics will join the list of commonly excluded risks in general policies such as war, terrorism and nuclear disaster. Indeed, Wimbledon's organisers have confirmed that its pandemic insurance will not cover the event in 2021. The widespread financial impact of such events is in conflict with the basic principle of insurance; that the losses of the few are paid for by the premiums of the many.
- Other insurance experts have raised the issue of pricing of premiums for pandemic cover, which could be challenging as these polices are likely to become very popular and come with a significant level of risk. Event organisers will need to consider premium pricing and whether the risk can be transferred in some other way, or self-insured.
- Insurance associations are calling for governments to intervene and back policies in the event of future pandemics, in the same way that they have with flood crises and terrorist attacks. Risk sharing between the insurance industry and governments can address gaps in coverage, so events organisers should monitor developments on any government backed schemes.
- Aside from coverage, events organisers should now also consider their contingency plans to avoid future break-point financial situations, whether these arise from a pandemic or another crisis.
Insurance for virtual events
Organisers could also take inspiration from Wimbledon’s digital recreation, which has pushed technical boundaries and, of course, the televised closed play matches in football.
Similar events could go some way to mitigate the financial losses from event cancellation. Insurers are also seeing opportunities here – and some companies are now introducing niche polices for live virtual event organisers. The virtual events world is most likely here to stay, whether it is sport-related or otherwise.
For further information please contact one of our Insurance and Risk experts.