How Wimbledon’s insurance policy prevented pandemic losses
The COVID-19 pandemic has had a significant negative impact on the sporting world. Events such as Formula One, MotoGP, and several football leagues have either had to be delayed, re-organised, or cancelled altogether. The NBA, NFL and MLB leagues in America lost a total of US$13bn due to the pandemic.
However, it’s a slightly different story for fans of Tennis and Wimbledon. In their financial statement for 2020 during the height of the pandemic, the All England Lawn Tennis Club (AELTC), the governing body and organiser of the Wimbledon Championships, posted an operating profit of £40.5mn (US$55.8mn). This was preceded the year before by an operating profit of £50.1mn. While the sport did make some losses, they were not as high as other sports. So, how has it been this successful? Well, that’s due to a pandemic insurance policy.
Wimbledon’s pandemic insurance policy
The All England Lawn Tennis Club has purchased pandemic insurance for the Wimbledon Tennis Championships for the past 17 years, purchasing it for the first time in 2003 following the Severe Acute Respiratory Syndrome (SARS) virus outbreak.
Having paid £1.5mn every year for the policy, the AELTC is expecting to receive a payout from its insurers of £114mn (US$157mn) for the cancellation of the 2020 tournament, although a final settlement is yet to be confirmed.
Wimbledon is the only one of the four tennis Grand Slams to have pandemic insurance, and even though the payout will not cover all of its losses, it still puts it in a stronger position than most other elite sporting events.
On the other hand, officials from the French Open reported that they could have lost £230mn (US$316.8mn) in 2020 if their tournament had not been played. Luckily, the event had been rescheduled for September 2020 and did take place.
Will pandemic insurance cover be available in the future?
The biggest concern for events like Wimbledon is how long pandemic cover will last and if it will be available in years to come. Some of the issues surrounding this include:
- Insurers are wary of the significant potential costs of protecting against pandemics. Some insurance experts predict that in the not-so-distant future, pandemics will join the list of commonly excluded risks in general policies such as war, terrorism, and nuclear disaster. The widespread financial impact of such events is in conflict with the basic principle of insurance; that the losses of the few are paid for by the premiums of the many.
- Other insurance experts have raised the issue of pricing of premiums for pandemic cover, which could be challenging as these policies are likely to become very popular and come with a significant level of risk. Event organisers will need to consider premium pricing and whether the risk can be transferred in some other way, or self-insured.
- Insurance associations are calling for governments to intervene and create back policies in the event of future pandemics in the same way that they have with flood crises and terrorist attacks. Risk-sharing between the insurance industry and governments can address gaps in coverage, so events organisers should monitor developments on any government-backed schemes.
- Aside from coverage, events organisers should now also consider their contingency plans to avoid future break-point financial situations, whether these arise from a pandemic or another crisis.
Although Wimbledon said it was difficult to retain their policy for this year’s event, the organisation’s 17-year commitment to the cover is almost certainly going to help them to significantly reduce the impact on the event, not just for 2021 but for at least some of the future.