Due to a restriction clause in its event cancellation policy, the Big East earned its second insurance payday Cash from IPass two years into the pandemic, this time $4.5 million for the practically fan-less 2021 men’s basketball championship hosted in March in Madison Square Garden. After recouping a $10.5 million payday in 2020 to cover that year’s postponed tournament, the conference’s total COVID-19 insurance haul now stands at $15 million.
Due to New York City’s large-gathering and events regulations, the 2021 event will operate at a very limited capacity, resulting in lost ticketing and reduced sponsor earnings, among other ancillary losses. COVID-19 safety precautions added to the conference’s expenditures (on-site testing, additional transportation and lodging space to ensure social distancing, etc. ), but commissioner Val Ackerman claimed the compensation helped the Big East reduce most of its payday losses.
In a phone conversation, Ackerman said, “We were able to capitalize on a policy that I don’t think many sports organizations were able to get.” “We are pleased that we received some decent advice on what to get covered here, because we were virtually made whole.” And the same will be true in 2020.”
What is the real kicker?
The conference’s saving grace for the past two years has been event cancellation coverage, which was negotiated in 2017 as a three-year contract that protected the Big East competitions from 2018 to 2020. Given the tournament’s location in the heart of New York City, Ackerman said the league has always provided full coverage for the event to protect against terrorism or other disruptions. The policy, which was extended for another two tournaments in January 2020, coincidentally carried the Big East through its 2021 and 2022 championships.
Major revenue source
According to Sportico’s intercollegiate finances database, the Big East tourney is one of the conference’s largest sources of revenue, alongside media money and NCAA paydays, which were lowered in 2020 owing to the pandemic but completely rebounded last year.
In an interview, Marc Blumencranz, managing director of insurance firm NFP Sports and Entertainment, remarked, “I don’t know of another conference that truly has event cancellation [insurance].” “The fact that they had infectious disease was an improbable event in our minds, but it was low enough as part of the overall premium to justify buying, and [the Big East] agreed that including that coverage made sense.”
Blumencranz has assisted in the establishment of insurance packages for properties such as the NBA and NHL. Along with the NCAA, NFP represents the Big East, which is one of nine active college conferences. When March Madness was canceled in 2020, the NCAA’s event-cancellation procedures helped them recover $270 million, roughly 25% of what the men’s playoff basketball tournament usually pulls in. Almost all of the Big East’s conference tournament losses have been mitigated by both of its communicable-disease-related paydays.
Given that most providers no longer offer communicable-disease coverage in the aftermath of COVID-19 settlements, the timing was unique.
“Unless you had event-cancellation insurance,” Leigh Ann Rossi, NFP’s COO, said, “nobody had coverage elsewhere that they could seek to preserve their lost revenue.” “Now, the premiums are higher, and they don’t cover communicable disease as part of a standard [insurance].” After 9/11, they didn’t offer terrorism news for a period, as I recall. Then they started offering it back, albeit at a higher price.”
“It’s hard to acquire fire insurance when the structure is still burning, so to speak,” Blumencranz said. The same is true for insurance against communicable diseases. It’s difficult to talk to an underwriter right now since they’re still paying out billions in claims on policies they wrote two years ago.”
Basketball championship earnings
The men’s basketball tournament of the Big East normally provides roughly a fifth of the conference’s annual income, which was slightly over $64 million in the fiscal year 2019. (the last fiscal year uninterrupted by the pandemic). According to tax papers, the conference earned $5.9 million from its championships that year, the majority of which came from the men’s basketball tournament. The value of those tournament games, which bring in major corporate sponsorship cash, is reflected in part of the Big East’s $36 million yearly TV deal with Fox.
The conference’s media compensation decreased somewhat to just under $33 million in FY20, which included the canceled 2020 Big East tournament, but championship revenue was crushed, plummeting to only $215,419, according to tax papers from that year. Corporate sponsorship revenue was nearly $1.4 million short.
While the losses in 2021 were not as severe—TV income stayed stable, and the league recouped some sponsor funds—they were still considerable for the Big East, which relies on basketball as its primary source of revenue. Its efforts to reduce losses, as well as government obligations from New York City, bolstered its case, putting the Big East in a unique financial position during the pandemic.