The organisers of the Tokyo Olympics are reportedly facing huge losses, most of which are uninsured, after spectators were banned from the games amid a resurgence of COVID-19.
According to a report by Reuters, the organisers have used up most of its event cancellation insurance due to the postponement from the original schedule dates last year.
Surging COVID-19 infections have forced the Japanese government to declare a state of emergency in Tokyo. Most of the Olympic Games will be held without spectators, in a bid to curb the rising number of COVID cases.
Some events, which will be held outside Tokyo, will be allowed to have spectators. However ticket revenues, which were projected at US$815 million (SG$1.1 billion), will be mostly wiped out.
In December 2020, organisers estimated the total cost of hosting the 2020 Olympics at around US$15.4 billion. According to the report, Fitch has estimated the total insured cost of the Tokyo Olympics at around US$2.5 billion.
The International Olympic Committee and the Tokyo organising committee split responsibilities, with sponsorship and global broadcasting rights going to the former, while the latter is in charge of ticket sales, the area most hit by the state of emergency.
The Tokyo committee reportedly has event cancellation cover between US$500 million and US$800 million, but ticket prices are not completely covered.
Costs from rebooking of sports venues and hotels from last year’s postponement have greatly eaten into the insurance limit, further lowering the chance of a payout due to the loss of spectators.
Reinsurers are most likely to take the largest hit from the Olympics losses. The spectator ban may cost them US$300 million to US$400 million, Fitch estimated.