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Swiss Re has $250mn exposure to Tokyo Olympics cancellation: CFO Dacey

20th March 2020 - Author: Luke Gallin

Global reinsurance giant Swiss Re has a specific exposure of USD 250 million to the cancellation of the 2020 Tokyo Olympics, and also potential exposure in other lines as a result of the COVID-19 outbreak.

Olympic ringsScheduled to commence on the 24th of July 2020, the ability for the Tokyo Olympics to take place has been unsurprisingly questioned in light of the spreading COVID-19 outbreak.

Numerous events from across the music and sport industries, as well as many other sectors have been cancelled or postponed indefinitely. However, currently, the President of the International Olympic Committee (IOC), Thomas Bach, has said that while alternatives are being explored, cancellation is not on the agenda with the IOC noting its commitment to the success of the 2020 games.

Ultimately, it’s too early to tell what the situation will be like in Japan and the rest of the world come July, but with the number of cases and deaths rising in Europe and other parts of the world, despite a notable decline in new domestic cases in China, it’s not too surprising that some feel the cancellation of the event is inevitable.

Of course, only time will tell and with the cancellation of the games seemingly a possibility, global reinsurer Swiss Re has commented on its potential exposure.

On a recent call, the reinsurer’s Chief Financial Officer (CFO), John Dacey, addressed the coronavirus pandemic and offered some insight into the firm’s potential exposure across the business.

“There are potential impacts from this pandemic on our P&C and Life & Health businesses. We assess all of these potential impacts to be entirely manageable at this point. With respect to event management and cancellations related to specific events, we believe we have an overall market share of approximately 15% to event covers that could be claimed due to COVID-19.

“We have a specific exposure of USD 250 million to the Tokyo Olympics, and a mid-three-digit exposure, split across CorSo (Swiss Re Corporate Solutions) and P&C Re, for other events scheduled over the rest of the calendar year,” said Dacey.

He continued to say that Swiss Re is also potentially exposed to the outbreak through its credit and surety lines within reinsurance and CorSo, but stressed that it’s simply too early to estimate any exceptional losses due to the pandemic.

“Similarly, it’s too early to give any indication of industry, and Swiss Re’s losses related to business interruptions,” he added.

The potential for business interruption losses from the pandemic has been a hot topic of debate in the insurance and reinsurance industry. Both analysts and companies have suggested that losses will be limited as a result of policy exclusions and wordings, and while Dacey noted that most policies have a physical damage trigger, he underlined that not all do and some might well have specific sub-limits that provide modest covers independent of physical losses.

Obviously, Swiss Re certainly won’t be the only re/insurer exposed to the cancellation of the games and other impacts from the coronavirus. Recently, executives at another of the largest European reinsurers, Munich Re, said that the firm had a three-digit million euro exposure to the Tokyo Olympics. It’s since been reported that the reinsurer provides cancellation protection for the games although it is unclear exactly how much this is.

According to analysts, the estimate insured cost of the Tokyo games is USD 2 billion, which includes TV rights, sponsorships, and also hospitality.

It’s now been widely reported that the 2020 Tokyo games could be postponed until next year, as Canada has joined the likes of Brazil, Slovenia, and Norway in saying that it will not send athletes to the games if they are held this year. If more and more countries take this approach, it seems hard to imagine the games going ahead this year.

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