Standalone haze insurance solution for Singapore

Singapore has been struck by a number of severe haze outbreaks over the past two decades – the source of which has stemmed from the burning of peat forests in the region.

The haze usually occurs during the southwest monsoon season, and becomes more severe during periods of dry weather, for example those experienced during an El Niño. Prevalent wind then transports the haze to neighbouring countries which can interrupt businesses and impact revenues.

Ongoing efforts continue to combat the haze issue, however this will take time to fully implement. Having spoken to clients before developing HazeShield, a real need emerged for an interim solution to help clients protect against lost income as a result of the haze.

What could haze mean for your business?

Though damage may not be physical, there could be potential financial implications due to losses caused by non-physical damage business interruption.

  • Loss of revenue from customers choosing to stay indoors and/or a decrease in tourism
  • The need to suspend operations for employee health or safety concerns
  • An event being cancelled or postponed
  • Reduced productivity, in particular for industries with employees required to be outdoors

HazeShield – Standalone haze insurance solution

The only policy you'll need to avoid non-physical damage business interruption to your business.

Our new solution indemnifies local businesses in Singapore against cash flow volatility caused by reduced customer footfall, forced shut-downs, and additional operating costs stemming from a severe haze event.

Here's how HazeShield will protect your business:

Improved liquidity and cash flow management due to guaranteed payout upon breach of trigger with minimal proof of loss provided.

Simplified and transparent claims process as no loss investigation and adjudication is required.

Broad coverage based on a pre-agreed payout which can be used to cater to NDBI losses.

Flexible and customizable features to meet specific business needs.

A complement to traditional insurance policies filling in potential gaps in cover.

GrowthsuranceTM: leverage insurance as a means of enabling revenue growth. For example, in the case of a severe haze event, a hotel provides guests with a free night's stay or refund.

How we modelled the haze phenomenon

To model the haze phenomenon we used data from the Singapore National Environmental Agency (NEA) and also from a haze reconstruction model, which was developed in partnership with Harvard University*. We were then able to develop a structure that takes into account land usage, global fire emissions and weather patterns that allows us to assess the risk and build a solution that would protect Singapore businesses from Non-Damage Business Interruption caused by the haze.

Applying a parametric insurance cover

With the Pollutant Standard Index (PSI) measured by the NEA, we are able to use these readings to develop two solutions that will provide clients with a pre-agreed payout if the consolidated PSI levels breach a certain threshold and as illustrated below:

Cumulative bad haze days: Step up payment based on number of "bad haze days" exceeding a cumulative threshold.

Extreme days: Single highest PSI recorded during the period of insurance above predefined PSI thresholds.

What have been the economic losses from haze?

According to the Swiss Re Institute, total economic losses sustained in Singapore as a result of the 1997 and 2015 haze event were USD 386 million and USD 897 million respectively, broken down by industry below.

*Disclaimer: This work was performed with the Harvard-Columbia online smoke tool. Neither Harvard nor Columbia have reviewed or endorsed the results or any conclusions drawn by Swiss Re.