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The contingency insurance market, which includes coverage for the cancellation of special events, could still see multibillion-dollar losses related to COVID-19, possibly as high as $6 billion, according to experts speaking Wednesday.
Peter Rossow, who handles commercial risk, health & benefits, retirement and reinsurance solutions for Aon PLC, and Ryan McGuinness, managing director, risk management in Daytona Beach, Florida, for NASCAR, were speaking about the elements of such insurance Wednesday at the Risk & Insurance Management Society Inc.’s 2021 conference, which was held virtually.
Contingency insurance can more broadly include things like hole-in-one insurance, where an insurer covers the cost of the prize if the feat is achieved; or even a contract bonus for an athlete who makes the playoffs, Mr. Rossow said. Covered costs can range from damage to the event location and adverse weather to terrorism, he said.
The policies are usually short-term contacts that cover the days of the events, but can be annual contracts covering multiple events, which is the type of policy NASCAR has in place, Mr. McGuinness said.
Event cancellation policies are typically all risk policies, Mr. Rossow said, for which underwriters want to know things like the location and timing of the event, among many other variables including security. While usually associated with special events like sports, such policies can also cover trade functions such as RIMS, he said.
NASCAR’s Mr. McGuinness said underwriters also want to understand what emergency action plan exists, such as that which would cover evacuation.
Both speakers stressed the importance of contract clarity with all parties and vendors associated with an event and said underwriters may even wish to see those contracts as part of their review.
NASCAR’s first COVID-19-related cancellation was the March 2020 Atlanta Motor Speedway event, Mr. McGuinness said. Racing returned without fans at the end of April.
Movie theaters, gyms, hotels and golf courses have been forced to close temporarily. Long-standing sporting events, such as the NCAA basketball tournament, the Masters golf tournament, the Kentucky Derby and the Olympics, have been canceled or significantly postponed. Broadway has gone dark, theme parks such as Disney World have shuttered, and musical performers have called off their tours. The economic implications of such closures and cancellations is likely to be staggering. It is thus anticipated that an increasing number of businesses will look to their insurance policies to mitigate their losses.