The Last Word
A Turn of Events
COVID-19 is forcing the cancellation of concerts and sports matches and bringing change to the event cancellation insurance market.
- Lori Chordas
- September 2020
The announcements came in droves. Wimbledon, the Tokyo Olympic Games, the Tony Awards and hundreds of other highly anticipated sports events, concerts, trade shows and other gatherings were canceled or postponed this year in the wake of the COVID-19 pandemic. As concert halls, stadiums and convention centers sat empty, the global crisis drew attention to event cancellation insurance and drove some big changes in the market.
Over the past several months, there's been a “real tightening” of the market, with rates climbing by roughly 50% to 100% and capacity diminishing largely due to an exodus of some carriers in the sector, Rej Audet, president of managing general agency BUA, said.
COVID has also brought about the rise of absolute communicative disease exclusions in event cancellation insurance policies, he said. Standard policies cover the cancellation, postponement or curtailment of an event due to unavoidable circumstances such as infrastructure damage, weather perils, terrorism or performers failing to show up to an event. But pandemics are not among the list of covered exposures.
Prior to COVID-19, event organizers had to buy additional coverage for communicable disease. But with the growing number of claims flowing in from the outbreak, the availability of all-cause event cancellation policy options that cover cancellations due to an outbreak of infectious or communicable disease is no longer an option, Audet said.
The good news is that policies purchased prior to the pandemic with that added cover are expected to pay out for losses stemming from canceled or postponed events, Audet said.
For the past 17 years, All-England Lawn Tennis Club, the venue for the Wimbledon Championships, has purchased event cancellation coverage for the world's oldest and most prestigious tennis tournament. This year that added cover could generate a payout for the club worth nearly $141 million for the canceled Grand Slam tennis event that was scheduled to run from June 29 to July 12, according to a report by sports media company Action Network. However, club officials have said that's only about half the amount they expect to lose from the canceled event.
Early estimates peg insurers' projected payouts from this year's canceled events at $7 billion to more than $13 billion, Audet said. But with the continued surge of new COVID cases across parts of the world it's still too early to project how high those numbers could climb and how the event cancellation insurance market will fare from the unprecedented number of cancellations, he said.
The industry has “certainly not seen anything of this magnitude from a global perspective,” Warren Harper, global sports and events industry practice leader for Marsh, said.
While Harper describes current conditions in the market as “challenging and fluid,” he expects that will soon change and new carriers may eventually enter the sector after “a COVID vaccine is developed and the dust settles a bit.”