In 2020, Wimbledon reportedly received 141 Million dollars from their insurance company due to cancellation of the event as a result of coronavirus. To get this cover, Wimbledon paid a premium of roughly 2 million dollars every year for 17 years.

Can you imagine being a board member and approving a payment for that high a premium for each of those 17 years? 

For context, the only times Wimbledon had been cancelled prior to this was during World War I and World War II. And so, a member of the board would have no reason to ever think that Wimbledon would be cancelled under any normal circumstance. 

Contrast this with the IPL in India. The BCCI had felt that pandemic insurance was not required because it wasn’t a real possibility and hence, the IPL only insured itself against war and terrorism.

An India Today article in April 2020 pegged the combined loss to the BCCI at roughly 3900 crores.

Luckily this did not come to pass, and we had a great IPL season later in the year as things started coming back to normal.

But what if they hadn’t been so lucky?

Insurance has been around for a long time, some of the first methods were recorded by the Babylonians in the Code of Hammurabi in 1750 BC. Insurance was a product that sailing merchants understood intuitively. Merchants would pay lenders an extra fee in exchange for waiver of a loan in case their shipments were lost or stolen.

This is not that different from how insurance is practiced today. If you take out a home loan, it is often bundled with an insurance premium that would pay off the loan in the case of your demise. This ensures that your house or other assets are not seized by the bank.

In this way insurance is an extremely important tool to have in your arsenal for protecting your downside in the case of unforeseen circumstances. As they say, the best way to make money is to not lose it.