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Saturday, April 4, 2020

Covid-19 stalls sports - hits Insurer badly !!

The biggest Sporting attraction is of course IPL – we would have been watching matches with keen interest – MSD, CSK, IPL would have been read, seen and spoken off everywhere – not to be ! This year's Wimbledon competition, scheduled for June 29 to July 12 stands cancelled. The cancellation  is s the first time in the tournament's history, the oldest tennis tournament in the world, since the second World War.  Simona Halep and Djokovic cannot defend their titles this year.  Covid-19 has taken its toll on the sports arena too.  The current economic situation of many German football clubs is more drastic than expected. According to a report from the sports magazine Kicker, 13 of 36 sides of the first and second divisions face insolvency in the case that the shutdown continues. The 2019/2020 campaign of the national leagues has come to hold after the 25 rounds of matches beginning of March due to the coronavirus crisis.

Manchester, July 2019 – Indians were in for a shock – their sporting icon MS Dhoni walked off in disbelief. His well-worn method of chasing, where he initially settles in like he’s playing in a bygone era, failed !  Dhoni hit out by striking a six off the first ball of the penultimate over to revive hopes – then quite unlikely he was  run out by a sensational direct hit from Martin Guptill.  A dejected Dhoni,   trudged off with India’s stunning World Cup exit assured – a day later or so, people started talking on whether the supremo had played his last International innings.  For his fans, there was glimmer of hope – thala MSD will continue leading Chennai Super Kings, the team  he has captained to three titles, in the IPL and with string of good performances would force his way to T20 WC 2020.

MSD & IPL have weather many storms including  politics, weather, elections, scam  and more.  With the COVID-19 pandemic locking the world down, cricket around the globe has been indefinitely stalled. Among the high-profile ones to be affected is the 13th season of the IPL. Though the chances of the tournament taking place this year is increasingly looking bleak, Kevin Pietersen is hoping for it to happen, saying, "I do truly believe the IPL should happen". The competition was slated to begin on March 29, but has been deferred until April 15, but with the situation not having changed significantly, the wait is likely to continue.  A few cricket matches in March, including the first ODI between Australia and New Zealand in Sydney, took place in empty stadia soon after the outbreak was declared a pandemic by the World Health Organisation (WHO).  Pietersen suggested for the tournament to be played at 3 safe venues and behind closed doors amid the spread of the deadly disease.

IPL is a money spinner – the 2019 edition is understood to have fetched broadcaster Star India advertising revenues of more than Rs 2,000 crore, slightly more than the revenues of Rs 1800-2,000 crore earned in 2018.  “IPL is bigger than the World Cup. There are more matches and for a sponsorship, it would cost anywhere between Rs 50-Rs 60 crore. Star acquired IPL at a far higher cost than what Sony was doing. They will have to make up for those acquisition costs.

Though not popular over here – ‘event insurance’ is a niche product of many Indian Insurers too.  It is a customized protection suitable for specific requirements.  Every event – be it a marriage reception, cine launch, movie teaser, music launch or Sports promo – these days could be multi-crore events – a cancellation after incidence of expenditure could pinch the Organisers badly.  The primary section indemnifies the assured for the ascertained loss if the insured event is cancelled, abandoned, postponed,  interrupted, curtailed or relocated -  direct result of a cause not otherwise excluded.  There could be many other sections such as – Public Liability, Props, sets, equipments coverage; cash protection; personal accident cover and more  ! – but all Indian insurers exclude diseases and specifically Corona now. 

Miles away, MailOnline reports that Wimbledon organisers are  set to net £100MILLION (INR 9376 crores approx. !) insurance payout after taking out infectious diseases cover following 2003 SARS outbreak, with tournament now cancelled because of coronavirus. The reports suggests that Wimbledon is preparing to submit an insurance claim 'in excess of £100million' following the cancellation of the tournament this week. The All England Club's insurance policy, in the region of £1.5m a year, was updated in 2003 after organisers asked for a virus-related clause inserted following concerns over the SARS outbreak.  

The cancellation of the event due to corona fear  is  first time since the Second World War.  According to the Times, Wimbledon chiefs are to see their insurance triggered by the cancellation with the clause that covers infectious diseases set to be worth as much as £100m.   Outgoing chief executive Richard Lewis revealed a virus clause was put into the All England Club's insurance policy in 2003 due to fears over the scale of the SARS disease.  The exact amount of the pay-out they will earn from their policy remains unclear with the organising costs and the prize money, to the tune of £40m, to be considered as deductions now it has been cancelled.  

Wimbledon was set to bring in around £250m in revenue for the grasscourt Grand Slam. Figures from 2018 showed that The Championships had an annual turnover of £254.8m. There will, inevitably, be some financial hit from the annulment, such as a dip in merchandising and food revenue. All England Club bosses made the tough call to abandon the third Grand Slam in the calendar entirely, a marked shift from the decision made by the French Open to hastily rearrange to late September, just a week after the US Open in New York ends.

One senior figure at the Club put the cost of the insurance policy at ‘around the low seven figures’. Wimbledon is the only Slam of the four - Australia, France and US - to have an insurance policy that includes a virus-related clause and it is reported that the French Tennis Federation felt they had no option to cancel entirely, risking a loss of £230m. The All England Club’s Risk and Finance Sub-Committee have long since insisted on a clause covering epidemics, and the policy has been accordingly upgraded in recent years.

Outgoing chief executive Richard Lewis on Thursday warned that, despite the good insurance policy, Wimbledon would sustain a financial hit, although the knock-on effect for British tennis would be limited. 'The insurance will help protect the surplus to an extent, I would say to a large extent,' he said. 'Of course we're fortunate to have the insurance and it helps, but it doesn't solve all the problems. The details and the figure probably won't be known for months.'  Prize money for the 2020 tournament was worth a total of £40million to players.

That’s is a whooping figure by all means ! – liability insurance !!

With regards – S. Sampathkumar

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