Insurance companies could face some cancellation claims in light of the sporting world's response to Russia's invasion of Ukraine, but they will be far more limited than what the industry experienced from events canceled or postponed by COVID-19.
A number of major sporting events that had been set to take place in Russia have been relocated, and many Russian national teams have been banned from competition across the globe. For instance, UEFA moved the May 28 final of this year's men's Champions League to Paris from St. Petersburg. Also, FIFA and UEFA suspended all Russian soccer teams until further notice.
Formula One pumped the brakes on auto racing in Russia, confirming that it terminated its contract with the Russian Grand Prix promoter. A host of other sports bodies, including World Rugby, the International Ice Hockey Federation and the Badminton World Federation, have also taken various actions against Russia.
Kroll Bond Rating Agency analyst Peter Giacone said the wording of most cancellation policies typically contains sanctions clauses given the legal requirements to comply with any sanctions levied. War is excluded on "virtually all" event cancellation policies, said Scott Schachter, Northeast entertainment leader at Risk Strategies, with the exception of coverage buybacks for ultra-large events. If war coverage was purchased, the F1 cancellation "could be large" and the relocation of the Champions League final could present a sizable extra expense loss, Schachter said.
Schachter does not expect sports bans against Russia to hit insurers nearly as hard as cancellations related to the COVID-19 pandemic. Based on his conversations with "some of the largest markets in the space," loss exposure is limited for the cancellation insurance market as a whole, though there are some political risk markets in London that may have more exposure than the contingency and cancellation markets.
Insurers paid out hundreds of millions of dollars in claims when the 2020 Tokyo Olympics were pushed back to 2021 because of the pandemic. Swiss Re AG CFO John Dacey during a March 2020 earnings call said the reinsurer had a specific exposure of $250 million to the Tokyo Olympics.
While the Summer Games eventually did take place, spectators were banned from in-person viewing of the competition. That added to the bill that insurance companies faced from their coverage of the event. Bloomberg Intelligence analyst Charles Graham estimated in a note that had the Tokyo Olympics been completely canceled, insured losses would have been in the $2 billion to $3 billion range.
Swiss Re, Munich Re and Chubb Ltd. declined to comment for this story. UEFA and F1 did not reply to requests for comment.