Reinsurers likely to face $300-400M in Tokyo Olympics losses: Fitch

Global reinsurers are likely to face $300 million to $400 million in losses from ticket and hospitality refunds due to Japan’s decision to bar spectators from the Tokyo Olympics, Fitch Ratings Inc. said in a report released Monday.

But this is only 10% to 15% of the losses reinsurers would have faced had the Olympics been canceled and should have a limited impact on earnings, leaving capital and ratings unaffected, Fitch said.

Fitch estimates the total insurance coverage for the Olympics to be about $2.5 billion, including $1.4 billion purchased by the International Olympic Committee and the Tokyo Organizing Committee, $800 million by broadcasters, and $300 million by sports teams, sponsors, hospitality and others.

“We believe reinsurers would bear most of the losses arising from this cover given that high-severity exposures are typically heavily reinsured,” Fitch said in the report.

Cancellation of the Olympics would have led to the largest ever insured losses from a single event cancellation, putting pressure on reinsurers’ earnings already hit by the pandemic and U.S. casualty reserve deficiencies, and following several years of high catastrophe losses, Fitch said.

With the Olympics now set to go ahead, though without spectators, reinsurance payouts should be mostly limited to losses from ticket sales and hospitality, the report said.

Given the reserves that reinsurers had already set aside for potential losses, this should not materially affect earnings, Fitch said.

Renewed event cancellation policies now exclude communicable disease coverage, which should shield insurers and reinsurers from losses due to further lockdowns in the coronavirus pandemic or future pandemics.

However, event cancellation policies are typically multiyear, so it will take time for the existing risk exposures to run off, Fitch said.