Waves of compensation claims were triggered after the Olympic Games and big tennis, football, rugby and other sports competitions as well as entertainment events were cancelled or rescheduled as a result of the Covid-19 pandemic.

While Hong Kong-based insurers do not have much direct exposure to most of these, the enormous payouts mean many global insurers will incur losses, and this will have a knock-on effect, increasing premiums worldwide, according to Eric Hui Kam-kwai, chairman of the Hong Kong Federation of Insurers.

Covid-19 has infected over 3 million people worldwide, including more than 1,000 in Hong Kong. Governments across the globe imposed social-distancing orders which has led to many sports events and music concerts to be cancelled or put on hold.

Globally, event cancellation policies only generate roughly US$250 million to US$350 million income for insurers annually. With payouts potentially exceeding US$6.3 billion, many insurers are going to suffer huge losses, according to Tommy Elliot, regional director of Circles Group, a Hong Kong-based specialist in event cancellation insurance.

Insurers may not cover business losses related to Hong Kong’s shutdown

“The pandemic is having a huge impact on the event cancellation insurance industry. It will be the biggest market loss ever,” Elliot said in a telephone interview. When other forms of compensation like travel insurance, business interruption insurance and credit insurance are factored in, he predicts the total payout may reach US$80 billion or more, bigger than that following the 9/11 terrorists attacks in New York in 2001.

Elliot said his firm had received some claims for cancelled trade fairs and sports events in Hong Kong and Asia. His company could manage the claims because he stopped accepting any new policies covering disease when the outbreak started in January.

In Britain, the organiser of the Wimbledon tennis tournament is expected to receive insurance compensation of £100 million (US$124.48 million), according to a report in The Times.

A payout of US$2 billion will be incurred for the postponement of the Tokyo Olympics from July to next year, credit rating agency Fitch said in a report last month.

Swiss Re, the world’s second-largest reinsurer, said on Thursday it had put aside US$253 million as reserves to pay expected claims for cancelled or postponed events as a result of Covid-19.

In March, Swiss Re’s chief financial officer John Dacey said in an investor call that it had US$250 million of exposure to the Tokyo games in the case of full cancellation. If the competition is only postponed, the payout will be lower. The insurer has a 15 per cent market share in global event cancellation.

Insurers rely on blockchain to fast-track payout amid coronavirus

German insurance giant Allianz’s corporate insurance arm has “limited claims exposure" to the rescheduling of the Olympic Games in Japan, according to Mark Mitchell, chief executive Asia-Pacific at Allianz Global Corporate & Speciality (AGCS).

The firm has received 4,100 Covid-19 related claims, mainly from the US and about 10 per cent from Europe. Allianz has offered cover for film production companies affected by the outbreak, as well as sports and trade fairs that have to be cancelled or postponed.

“Many film production crews, studios and media services providers have had to stop their productions as larger gatherings are forbidden in many countries at the moment,” Mitchell said in a written interview.

In February, the shooting of the seventh film in the Mission: Impossible series in Italy was halted due to the Covid-19 outbreak. It is not clear if the film has insurance cover.

Elliot of Circles Group said event cancellation policies were more popular in America than in Asia, but he believes the pandemic may change that.

“After the many events cancelled due to the pandemic, many organisers in Asia will be aware of the need to get insurance cover for event cancellation," he said.