In order to prevent the diffusion of Covid-19, Singapore authorities have put in place many new measures as of March 27 mars 2020 which include closure of all tuition and enrichment centres, bars, cinemas and entertainment venues. This is a first step and it may lead to more business closures in coming days or weeks if the outbreak of Covid-19 is out of control. Are businesses protected against forced closure of their premises by the public authority of Singapore?
Business interruption insurance not applicable
Closure of business is covered by business interruption insurance and this is a common policy for companies and retailers in Singapore. However, this policy is triggered by material damages, be it a fire, water damage, storm or any type of event that will lead to material damage. In that case, if the company suffers loss of income, the policy will be able to pay out the difference of income and direct charges. Outbreak or human infectious or contagious disease like Covid-19 can be considered as an “event” impacting the activity, but they do not lead to material damage so it is not covered under most business interruption insurance policies. Actually, coverage for business interruption without damages is rare in the market and only available for large companies as insurers are very selective in underwriting this risk.
Business packages for SMEs do offer basic coverage
Most small and medium-sized companies in Singapore are covered by business packages or business owner’s policy. Those packages include multiple options that can be selected according to the nature of the business. It is a convenient way to get comprehensive packages for small businesses in Singapore. Almost all those packages will offer Daily Cash Benefits as well as loss of profit insurance coverage. Though the trigger of Daily Cash Benefits is also a material damage like business interruption insurance, most contracts will cover as well an outbreak of human infectious or contagious disease like Covid-19. Under this clause, the coverage may be further limited but will provide a small compensation limited in time.
Too late to act
This benefit is available for all policies purchased prior to March 26, date the Singapore authorities announced the forced closure of some businesses. But since the risk with Covid-19 is now clearly identified, insurers will not offer this benefit any longer for new contracts: it will only cover the next outbreak of Human infectious or contagious disease but not Covid-19.
So for all tuition and enrichment centres, bars, cinema and entertainment venues which have a business owner policy in place with Daily Cash Benefits, do not forget to contact your insurer and claim accordingly. It will provide a small compensation for the loss of income you are facing. And we all hope that no other businesses will be impacted from forced closure. Contact us if you need more information about your policy.