Delay in insuring IPL set to sting BCCIApril 19, 2020
The Board of Control for Cricket in India (BCCI) is set to face massive losses after failing to insure this year’s Indian Premier League against cancellation due to a pandemic. Why? Because by March, when the BCCI got in touch with their insurance company to get the cover for this year’s IPL, the company had omitted COVID-19 from their coverage clause. This was one of the many points made in ‘COVID-19 impact on sports’, a research report compiled by Howden Insurance Brokers, a private firm that brokers insurance deals for many of the IPL franchises. A top BCCI official told HT that they are staring at major losses in case there is no IPL this year.
“We will see what’s the legal interpretation of force majeure in this scenario. The government has enforced a lockdown, and the BCCI can do nothing but wait for things to improve,” he said.
The BCCI invests in two types of insurance; one covers their international fixtures while the other covers the IPL. Although the IPL is held annually, it goes to the market every year for a new policy. Karan Ruia, assistant vice-president at Howden, who worked on the report, explains. “For every IPL, there is a single event policy. The policy ratings change, based on the loss ratio and the exposure,” said Ruia. The franchises also get their own insurance as a safeguard against losses due to any force majeure.
The report says there was a scramble to seek cover against COVID-19 among franchises as the virus began to spread and the threat of a no show became real. “The franchises involved in IPL approached the insurance market from February-March 2020 as they have training camps beginning mid-March. Due to the outbreak of the coronavirus and the WHO declaring a pandemic, 90% of the franchises were not provided insurance cover. Typically, immediately following an outbreak, cover becomes unavailable or quite expensive,” the report observes.
Two franchise chief executives confirmed they are not covered, and, to their knowledge, neither are the other franchises. “We checked with our insurance company. The cancellation clause does not cover pandemic. It’s too late now,” a top franchise official said. With the IPL suspended till further notice, the total loss for all stakeholders may be around Rs5,000 crore.
Considering the high stakes in play for the IPL, the BCCI may have missed a trick. Not all tournament organisers, however, have made that mistake. Take the Wimbledon Championships for example. Their organisers had the foresight to account for a cover against pandemics. Following the SARS outbreak in 2003, they have reportedly paid around 25.5 million pounds in premium, and are now set to receive an insurance payout of about 115 million pounds for this year’s cancellation.
The BCCI and some of its long-term partners stand to be compensated for most of the losses incurred due to the suspended limited-overs series against South Africa in March. That’s because of the annual policy BCCI had in place in 2019, was signed much before the virus had struck. “The policies which were placed annually without coronavirus exclusion did manage to reap the benefits of event cancellation policy. Cancellation of India vs SA series due to COVID-19 has resulted in a loss of close to Rs100 crore to the insurance industry,” said the report.