The National Collegiate Athletic Association has received the final portion of a $270 million insurance payout it claimed after canceling the Division I men’s basketball tournament in March because of the pandemic.
The Indianapolis-based organization said Monday the last payment of its event cancellation insurance claim was approved and received “within the last week.” The amount was not disclosed.
“I can confirm that the full claim has been received,” an NCAA spokesperson said in an email to IBJ. “The final funds were received within the last week.”
The organization’s insurance, which spans multiple policies, includes communicable disease and pandemic coverage—a rarity for most business interruption policies. The same insurance policy will be in effect for the 2021 Division I men’s basketball tourney.
The NCAA did not respond to questions about the identities of its insurers or other details about its business interruption claim.
The insurance payout will make up for just a fraction of the losses caused by the cancellation of March Madness.
The NCAA had expected to receive about $827 million from its overall $10.8 billion television rights deal with Turner Broadcast System Inc. Money from the Turner deal accounted for about 72% of the NCAA’s total of $1.12 billion revenue in 2019.
In May, NCAA executive Kathleen McNeely told trade publication Athletics Administration that the organization expected to lose more than $700 million from ticket revenue and television rights combined.
McNeely, senior vice president and chief financial officer for the NCAA, also said the association had decided in the past against carrying more insurance coverage because it didn’t seem to make financial sense at the time.
“I can’t even say that membership would have had an appetite for what that premium would have cost us, annually, for additional insurance,” McNeely said. “The amount of insurance we held was healthy, especially given the probability of the risk.”
The NCAA’s insurance payout is perhaps the largest for a pandemic-related event cancellation thus far. In April, organizers of the Wimbledon tennis tournament in England said they would receive $141 million for canceling the summertime tennis tournament—about half what they estimated would be lost from it being called off.
Zach Finn, an insurance and risk management expert at Butler University, said pandemic insurance is generally very expensive. He said while most cancellation policies exclude pandemics, large organizations typically require their insurance underwriters to cover it.
“I’d have to say from their perspective, they’re going to be pleased as punch,” he said of the NCAA. “Any major sports league that doesn’t have this type of policy or coverage I would look at as having not been prudent from a risk management perspective. It definitely [reflects] that the NCAA has been very prudent by having this.”
Finn told IBJ in March he wasn’t confident the NCAA had such a pandemic-inclusive insurance policy, as it is still a rarity in the industry. The organization later publicly confirmed its coverage extended to pandemics.
Insurance is one of several ways the NCAA has sought to minimize its pandemic-related losses over the past several months. The association has also tapped into its $414 million financial reserves, reduced Division I revenue distribution and slashed its operating budget by 43%.
The maneuvers are intended to help the NCAA recover within 18 months.
“The remediation plan is working as designed. If the NCAA can get through next year without any major problems, we should be back to normal for our fiscal year beginning Sept. 1 of 2021. That’s pretty incredible for losing two-thirds of your revenue in one year,” McNeely said. “We had a plan. We’ve implemented the plan. And the plan is working.”
Rather than completing the distribution of $600 million to Division I schools in 2020, the NCAA’s board chose to distribute $225 million—including $50 million from its reserves—to the institutions. Lower-division schools still received their expected cuts of the NCAA’s revenue.
The NCAA’s budget through Aug. 30, 2021, was also slashed from about $412.5 million to $236.5 million, in part from executive pay cuts ranging from 10% to 20% and hiring freezes.