The cancellation of the 2021 Tokyo Olympics due to the COVID-19 pandemic led to significant financial implications for the International Olympic Committee (IOC).
The IOC had taken out insurance to mitigate risks associated with the cancellation, which proved to be a crucial decision.
The insurance policy covered costs such as venue construction, equipment, and staff salaries, totaling $1.3 billion.
The IOC's financial accounts for 2021 revealed a significant reduction in revenue due to the cancellation, with a net surplus of $1.1 billion down from $2.2 billion in 2019.
A key factor in the IOC's financial resilience was its $1.2 billion reserve fund, which helped to offset losses.
The IOC's financial accounts also highlighted the importance of contingency planning and risk management in the face of uncertainty.
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Re/insurers Near Tokyo Olympics
Re/insurers are on edge as the Tokyo Olympics nears, with potential losses of $2-$3 billion if the event is cancelled.
The IOC has taken out around $800 million in event-cancellation insurance, but the insured cost of cancelling the event is estimated to be in the $2-$3 billion range.
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Swiss Re has a direct Olympic exposure of $250 million, which is about 1% of its net-earned premiums.
Munich Re likely has exposure in the hundreds of millions of euros, some of which may already have been reserved.
Insurers and reinsurers will be on tenterhooks over the next six weeks as the Tokyo Olympics’ opening nears.
The Tokyo Olympics' cancellation could hit an event-cancellation industry already battered by record 2020 claims.
According to the latest polls, opposition in Japan to holding the Olympic Games may be easing after the number of COVID-19 cases dropped.
Medical opinion remains strongly opposed to the games taking place, with reports that Japanese corporate sponsors also favoured a postponement after international spectators were excluded.
The IOC is focused on making the games as safe as possible, with plans for daily testing and the vaccination of athletes.
A decision on allowing spectators into venues will be taken later this month.
The IOC pays for insurance against the cancellation of an Olympics, but it's unclear if its policy covers the one-year postponement forced by the coronavirus pandemic.
The IOC set aside $650 million to cover its own potential extra costs for the postponement.
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Financial Risks and Stakes
Millions of dollars are at stake for the world sports federations if the Tokyo Games are cancelled.
The 33 world sports federations in the Olympic program, including the 28 permanent federations and the five guest sports, are primarily concerned with money rather than the health of athletes.
$590 million will be shared among the 28 permanent Olympic IF and their umbrella organisation ASOIF, with the highest category A federations receiving $40 million and the lowest category E federations getting $14.1 million.
Some federations, such as AIBA (boxing), UIPM (modern pentathlon), WA (archery), IWF (weightlifting), ICF (canoeing), and ITU (triathlon), cannot survive without the Olympic royalties, which are due to be paid in late 2020.
The IOC payments are crucial for these federations, but they will not receive the expected amounts if the Games do not take place and the IOC will not receive almost $3 billion from TV stations and sponsors.
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Other smaller associations, like the ISSF (shooting) and FIE (fencing), led by Russian billionaires Vladimir Lisin and Alisher Usmanov, would be able to cope without the IOC royalties if needed.
Alisher Usmanov, one of the billionaires, recently donated a historic manuscript of IOC’s founder Pierre de Coubertin to the Olympic Museum for $8.8 million.
IOC Compensation and Claims
The IOC is in talks with insurers to seek compensation for the postponed Tokyo Olympics. The International Olympic Committee pays for insurance against the cancellation of an Olympics, but it's unclear if its policy covers a one-year postponement.
The IOC has set aside $650 million to cover its own potential extra costs for the postponement. This is a significant amount, and it shows just how much the Olympics can cost.
The IOC's annual accounts show that cancellation policies for past Olympics cost $14.4 million for the 2016 Rio de Janeiro Olympics and $12.8 million for the 2018 Pyeongchang Winter Games. These costs are likely to be much higher for the Tokyo Olympics.
Retaining the Olympic Village for another year is a major issue for the IOC. The complex of over 5,600 apartments in Tokyo Bay is a fundamental part of delivering the games.
Frequently Asked Questions
Why didn't they cancel the Tokyo Olympics?
The Tokyo Olympics were not cancelled because the contract between the IOC and Tokyo only allows the IOC to cancel, not the host city. This contractual limitation played a significant role in the Olympics proceeding as scheduled.
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