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The new parametric insurance product protects companies from potential loss of income and reduced trade as a result of a haze event impacting Singapore.
Widespread burning of peat forests in Southeast Asia has given rise to numerous severe haze outbreaks over the past two decades. While governments and the private sector have made significant efforts to reduce haze, these will need time to fully take effect. Furthermore, meteorological factors and regional weather patterns can worsen the effects of the haze phenomena.
According to data from Swiss Re, total economic losses from just two haze-related events – in 1997 to 1998 and 2015 – reached approximately US$1.3 billion. Of this, nearly US$900 million was caused by the 2015 event which severely impacted the transportation, tourism, health and education sectors in several Southeast Asian countries.
“The financial consequences of a haze event can be severe, especially when businesses need to suspend operations or close,” said Didier Bélot, head of Southeast Asia at Swiss Re Corporate Solutions. “Up until now, conventional property insurance did not cover the financial losses resulting from a haze event. We designed HazeShield to bridge this gap, address a local issue and provide an extra layer of resilience.”
HazeShield, being a parametric insurance product, will pay out a pre-agreed amount that is matched to specific customer needs and requirements. The trigger for payouts is based on Singapore’s National Environment Agency (NEA) Pollutant Standard Index (PSI) levels rather than loss or damage to physical assets. Unlike traditional insurance covers, it does not require loss investigations or adjustments and can be provided for two scenarios: a prolonged or extreme PSI level.
The risk model behind HazeShield was developed in partnership with Harvard University’s John A. Paulson School of Engineering and Applied Sciences.
