After the SARS outbreak in 2003, The All England Lawn Tennis Association (AELTA), which organizes the Wimbledon tennis tournament, purchased pandemic insurance for around $1.9 million every year. Due to the cancellation of the 2020 edition of the 152-year-old tournament because of the coronavirus, AELTA is set to receive an insurance payout of around $142 million, according to reports.

AELTA earns around $160 million in media rights, $151 million in sponsorship and around $52 million in ticket sales annually, according to GlobalData’s SportCal. However, while it will save around $40 million on prize money and more on staff wages, this still is a significant loss of income, despite the large insurance payout.

The SARS outbreak 17 years ago gave AELTA the impetus to buy pandemic coverage after “SARS” became a common exclusion on events policies. After the swine flu outbreak in 2009, “communicable diseases” became a common exclusion on most polices.

Unlike most insurance, cancellation insurance only goes into effect “once it is fully paid for—it’s 100% earned premium at payment,” says David Macknin, property-casualty consultant, Alper Services LLC in Chicago.

“Smart risk managers, brokers and advisers get their clients’ events insured years in advance. On the downside, you lose the cash value of the money because you’re sinking your premium in advance,” Macknin says. “The upside is, as history shows, world events will narrow the coverage. When something happens, the insurance industry responds by limiting the scope of the coverage.”

The coronavirus crisis forced the 2020 Tokyo Olympics to be postponed until 2021. However, speculation over whether it will take place at all continues. Jefferies analysts have estimated the insured cost of the games at $2 billion, including TV rights and sponsorship, plus $600 million for hospitality. The International Olympic Committee (IOC) takes out around $800 million of protection for each Summer games, according to Reuters.

In April, Forbes reported that Tokyo 2020 CEO Toshiro Muto acknowledged that organizers have taken out “several” insurance policies, “but whether the postponement of the games qualifies as an event that is covered is not clear.” Additionally, postponing and not canceling is set to make estimating payouts difficult since the full cost cannot be calculated until the event takes place. But above all, there is doubt over whether pandemic coverage is included.

One clear coverage determination, however, was for the annual South by Southwest (SXSW) music, technology and film festival in Austin, Texas, which attracted more than 417,000 people last year. In March, it was reported that the event organizers will foot costs related to the event’s cancellation because disease outbreak was excluded from its insurance policy.

“I hate to say, but if anything good is going to come out of a pandemic like this, you can see that agents and insureds are much more engaged in the process for insuring a special event,” says Patrick Gavin, managing director, Alive Risk.

“At some point, insureds will have felt like the classic insurance person is just trying to sell more coverage. But this is a perfect example of where a whole lot of people could have bought cancellation coverage but never did,” he says. After the big cancellations like Wimbledon and SXSW, “everyone is much more engaged in ensuring they understand what coverage they’re buying,” he adds. “It’s a good time to educate agents and insureds on the available coverages.”

“There’s been a massive shift in the cancellation market,” Macknin says. “We’re advising clients that if they know they have events, be pragmatic and buy the cover. It isn’t getting cheaper, and you’re going to see more severe exclusions in the future.”

“Any big organization or big event organizer knows when all their future events are going to take place. The organizers know when Wimbledon 2021 is supposed to be—it’s already on the calendar,” Macknin adds. “Ask them to insure it now, give up the value of the money and then perhaps buy back some of the coverage.”

Will Jones is IA managing editor.