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Straco Corporation's insurance claim for Singapore Flyer breakdown denied
STRACO Corporation's insurance claim for the cost of repairs and loss of profit arising from the breakdown of the Singapore Flyer has been denied, the company said in a Singapore Exchange filing on Monday.
It operates, through its unit Straco Leisure, the observation wheel which was suspended on Jan 25 for about two months until April 1 due to a technical issue.
While Straco Leisure has a property damage and business interruption (industrial all risks) insurance policy covering the flyer's operations, the claim was denied because reasons for the breakdown, and the chief reason for the loss of profit, fall under certain exclusions set out in the policy relating to claims that arise from damages due to "gradually developing flaws, damages for which certain third parties are responsible, and damages attributable to enforcement of laws being excluded under the policy".
Straco is currently obtaining advice from its insurance broker and its legal advisers on the correct interpretation and application of the policy and will try to protect its interests. If the company's claim is partially or fully unsuccessful, it will not be able to recover all or part of the costs of repairs and/or loss of profit for the breakdown of the Giant Observation Wheel.
Net profit for its first quarter ended March 31 had plunged 60.1 per cent from S$8.9 million in the year-ago period to S$3.6 million, as the suspension took a toll on the results for the developer and operator of tourism-related attractions in Singapore and China. Straco's shares ended unchanged at S$0.75 on Monday, before the announcement was made.