Whilst most event cancellation policies cover ‘all risks beyond your control’, communicable disease is excluded as standard. The exclusion can, however, be removed by paying an additional premium to cover the necessary cancellation of an event as a result of a disease outbreak. In my experience, international sport federations are not always clear about the risk or whether the additional premium is justified. So let’s try to be clear…
First of all any covered loss would have to be as a result of the necessary cancellation of the event. The policy would not respond, for instance, if the organisers decided to cancel on their own initiative as a result of widespread fear or concern.
But is the risk being overstated? The more recent outbreaks of SARS/ H5N1 influenza have affected only specific geographical areas. The SARS virus killed an estimated 15% of cases. The continuing outbreak of H5N1 influenza, also known as Avian Flu, has killed at least 300 people, but failed to spread from human to human. However, there is a realisation that new diseases are appearing at an ever increasing rate, linked to easy access to travel and the globalisation of the economy.
Foot and Mouth disease, which caused serious disruption to sporting events in the UK and Europe, is now considered to be a particular issue in South America. More recently a new SARS-like virus has been described by the director-general of WHO as "a threat to the entire world”. The virus, dubbed MERS-CoV, has been seen mostly in the Middle East, with some reported cases in Europe. It has a 50% fatality rate and, worryingly, it is not yet known how the virus is contracted.
However, the deadly flesh-eating Ebola virus, for which there is no known cure or vaccination is the focus of most current concern. Insurers have reacted quickly to the comments being made by the World Health Organisation and are already declining to offer any cover in respect of the Ebola virus. They are still offering cover for other communicable disease and any cover already effected is not affected. This again demonstrates the advantages of purchasing this cover early.
So before buying the extension event organisers and federations should consider questions relating to location, the potential financial impact of cancellation as well as the relative likelihood of an epidemic. We would always recommend buying the extension where the overall rating of the risk is medium to high, or where the potential financial impact is high. As with all risks – particularly those relating to pandemics – the situation can change rapidly. So we also recommend regular consultation with your broker, especially at present with the news on Ebola from West Africa changing with every bulletin.
Read our JLT Sports Bulletin on Communicable Disease and Swine Flu Risk for further information, which was written just prior to the Ebola Virus issue hitting the news.
For further information, please contact Gary Flynn, Partner, Financial Lines Group on +44 (0)20 7528 4329