The coronavírus continues to run rampant as an increasing number of people around the world continue to worry. It’s not just individuals that are concerned, insurers are facing potentially billions of dollars in losses if the 2020 Summer Olympics were to be canceled over coronavírus fears. As far fetched as that sounds, it’s entirely possible.
The 2020 Summer Olympics are set to take place in Tokyo. So far, Japan has reported over 200 cases of the coronavirus, with more expected to surface in the coming weeks.
Japan’s Prime Minister Shinzo Abe has assured the world that the Olympic Games will continue as planned with the opening ceremony taking place on July 24, 2020. However, many experts believe that it’s still entirely possible that Japan will be forced to call off the games if the coronavirus continues to spread in the lead up to the games.
Aside from the bad press that would surround a cancellation of the games, Japan has a lot of money invested as the host country. Naturally, they have a rather vested interest in making sure the games happen. Current estimates show that Japan has invested roughly $12 billion in the 2020 Olympics so far.
Of course, the bad press surrounding a cancellation of the games would be nothing compared to the public relations and humanitarian nightmare that would occur should a coronavirus outbreak occur during the Olympic Games.
Adrian Thomas, a director at insurance broker Aon spoke with the Insurance Journal about the fiscal repercussions a cancellation would have on Japan. “If they have to cancel 2-3 weeks before the event start-date, they have spent everything they have to spend. If you have three months to go before the event start-date, they have an opportunity to save some event costs,” said Thomas.
According to the International Olympics Committee (IOC) the decision to postpone or cancel the games can’t be made any later than May 2020. IOC President Thomas Bach told the insurance journal that the committee is still “fully committed” to the games moving forward this year.
According to the Insurance Journal, “The IOC takes out around $800 million of protection for each Summer Games, which covers most of the roughly $1 billion investment it makes in each host city. Insurance sources estimated it would pay a premium of about 2-3%, giving a bill of up to $24 million to insure the Tokyo event.”
Jefferies analysts estimated that the total insured costs for the 2020 Summer Olympics to be roughly $2 billion, which includes TV rights and sponsorships, with another $600 million dedicated to hospitality.
The coronavirus is still in its infancy. The world may be in a panic now, but it’s entirely possible that a cure is found in the next few weeks and this panic is short lived. Alternatively, the virus could continue to spread and fore the closures of more events and even borders. The speed at which it spreads will be what determines whether Japan is able to allow the 2020 Olympic Games to move forward or not.