Lessons from Tokyo 2020: Insurance Perspectives of the Olympics

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Monday, August 09, 2021 / 08:09 AM /  OpEd By Ekerete Ola Gam-Ikon  / Header Image Credit: NYTimes/Ecographics

 

The modern 124-year Olympics has come and gone but left us with too many lessons to draw from as we continue to live above the coronavirus pandemic, which caused the Games to be postponed for the first time for the first time in its modern history.

 

The International Olympic Committee (IOC) and the Japanese organizers were adamant even as the petitions increased against holding the Games and under a State of Emergency declared in the City of Tokyo shortly before the commencement of the Games.


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The Olympics is the biggest sporting event in the World and faced the biggest threat we have seen in COVID-19 pandemic, so as the postponement was announced in March 2020 by 12 months, there was great relief for the global insurance industry that the Games were not outrightly cancelled as the losses were estimated to reach about 10 times the losses resulting from the postponement.

 

According to a Reuters report quoting brokers, if cancelled, insurers were to have faced a $2-3billion loss, which would have been the largest ever claim in the global Event Cancellation Insurance market.

 

Tokyo 2020 may have been smaller, failed to attract the biggest stars and the level of sponsorship associated with the Olympics but it has significantly improved the way we are managing the COVID-19 pandemic and traditional risks such as weather, terrorism, political and social justice coupled with the travel restrictions within existing transport systems.

 

Size of Tokyo 2020 Protection

The just concluded Olympic Games had 11,500 athletes competing in 33 different sports across 339 events in 42 venues. About 79,000 officials, journalists and support staff were welcomed with zero spectators according to the data provided by the IOC.

 

While the IOC reportedly invested $1billion in the host country in line with its tradition, Japan itself invested over $12.5billion and the total insurance coverage for the Games was around $2.5billion. The IOC traditionally sets aside $800m of insurance for each Games besides what the Local Organizing Committee (LOC) would do as well as that of broadcasters usually in huge amounts.

 

The primary insurance taken up by the IOC is Event Cancellation (EC) cover and Tokyo 2020 had both the IOC and LOC having the larger share of $1.4billion, broadcasters $800m, then teams, sponsors and hospitality organizations $300m to make the total or $2.5billion for insurance coverage.

 

The Challenges of Insuring Tokyo 2020

Ordinarily, EC policies are bought in advance to cover cancellation due to infectious diseases but, for the Games in Tokyo, it was necessary to clarify that the policy covers the one year postponement forced by COVID-19 pandemic.

 

More so, with many insurers rushing to exclude COVID-19 pandemic from the policies last year, spurring the cancellation of events across the World over several months, the pricing of the risks needed to be revisited and formed major part of the consideration for the postponement.

 

Elsewhere, those who had secured the use of the apartments built in the Games Village also needed to be sorted before and after the postponement was announced, with insurance implications.

 

Broadcasters, sponsors and hospitality organizations that had mobilized their resources, though with uncertainty, incurred costs that followed the one year postponement and some could not have their full strength at the Games.

 

In all cases, insurance payouts following the postponement could have been difficult as organizers and others would have still managed to earn good revenue as the Games finally took place.


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Key Takeaways

Generally, it was interesting to note that the entire Tokyo 2020 was powered by renewable energy, an emergent solution to lack of electricity in Africa. Knowing this was possible emboldens one to believe that, indeed new solutions can be found for age-long problems as we have, particularly, in the insurance sector.

 

Also, the beautiful medals we saw the athletes display are products of recycled smartphones, laptops and other old electronic gadgets donated by the public according to reports from the Tokyo Medal Project Team.

 

Related Link: Tokyo Olympics Medals Were Made With Tons of Recycled Smartphones, Laptops Donated by the Public - Aug 03, 2021

 

Furthermore, Africa's participation at Tokyo 2020 revealed that we would probably need the Association of National Olympic Committees of Africa (ANOCA) to do more if Africa will get more out of future games scheduled for Paris (2024), Los Angeles (2028) and Brisbane (2032). Hopefully, the Olympic Medal Count showing only 13 African countries out of the 54 that participated will stimulate some new thinking:

 

Tokyo 2020 Olympic Medal Count

Rank

Team/NOC

Gold

Silver

Bronze

Total

Rank By Total

19

Kenya

4

4

2

10

25

36

Uganda

2

1

1

4

47

52

South Africa

1

2

0

3

60

54

Egypt

1

1

4

6

39

56

Ethiopia

1

1

2

4

47

58

Tunisia

1

1

0

2

66

63

Morocco

1

0

0

1

77

74

Nigeria

0

1

1

2

66

77

Namibia

0

1

0

1

77

86

Botswana

0

0

1

1

77

86

Burkina Faso

0

0

1

1

77

86

Cote d'Ivoire

0

0

1

1

77

86

Ghana

0

0

1

1

77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Specifically for the global insurance industry, it is great to know that Allianz, the German insurance giant is completing the first year of an 8-year insurance agreement with the International Olympic Committee to provide insurance cover for its Games. This agreement will run until Los Angeles 2028!

 

Lloyds of London insurers and reinsurers like Munich Re and Swiss Refaced the biggest test for event cancellation insurance with Tokyo 2020, and according to Fitch Ratings, both reinsurers would have been paying out about $750m (Munich Re $500m; Swiss Re $250m).

 

It is worthy of note that the lessons learnt from Tokyo will be taken to Paris 2024 and that provides some reasonable time for insurers in Africa to research and study the experiences of Tokyo 2020 and be in a better position to deliver similarly to projects of such nature (not size) within the continent, for example, the African Continental Free Trade Area (AfCFTA).


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Last Line

Was the Nigerian contingent to Tokyo 2020 insured? Which local insurer provided the insurance cover? What was the experience like waiting for the feared announcement of cancellation and later postponement?

 

The development of our insurance market and systems will be boosted by the sharing of more of such knowledge and the relevance of insurance would be more readily appreciated with connected thinking as I have tried to show here.

 

About The Author 

Ekerete Olawoye Gam-Ikon, MNIM, CPP, is a management consultant with a specialization in Strategy and Insurance. You can contact him via e:mail olagamola@gmail.com and mobile +234-806-648-1111 


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