RISKSA Magazine - - SHORT TERM -

You know the rates are low when it costs more to in­sure your car than it does your plane. Granted, South Africa’s roads are more dan­ger­ous than its skies, but avi­a­tion in­sur­ance mar­gins are none­the­less un­der tre­men­dous pres­sure. How­ever, with James God­den at the helm of a team of 12, San­tam Avi­a­tion is hold­ing on to its piece of sky.

“The rates are un­sus­tain­able, but I said that two years ago and they have fallen fur­ther since then. This is de­spite the fact that there are more claims now than there were in the past,” says God­den. He be­gan his ca­reer as an avi­a­tion bro­ker with a BA ( LLB). A weak Rand makes re­pairs more ex­pen­sive, while fierce com­pe­ti­tion and an over­sup­ply of ca­pac­ity keeps rates low. “Un­less there is a cat­a­strophic event to ab­sorb a large amount of this ca­pac­ity and place rein­sur­ers un­der pres­sure, or a large player ex­its the mar­ket, the sit­u­a­tion is not set to change any­time soon,” he adds. When a plane car­ry­ing wealthy and well­con­nected Amer­i­cans flew into Mount Kenya in 2003, killing all 14 peo­ple on board, San­tam Avi­a­tion was hit with a R40 mil­lion li­a­bil­ity claim. For­tu­nately, it was even­tu­ally set­tled at R2 mil­lion un­der the War­saw Con­ven­tion, which reg­u­lates li­a­bil­ity for in­ter­na­tional air car­riage, but the in­ci­dent demon­strated why hu­man er­ror ac­counts for 99 per cent of all avi­a­tion ac­ci­dents. The air­craft missed clear­ing the moun­tain by just seven me­tres, due to poor vis­i­bil­ity. “I think the in­dus­try is at a cross roads and some sense is needed on rates. With al­ready thin­ner mar­gins in avi­a­tion, we need more pre­mium in the mar­ket,” God­den con­tin­ues. The ma­jor­ity of air­craft in South Africa is in­sured, which means the pie is un­likely to ex­pand a great deal. Mov­ing to in­sure large car­ri­ers, like South African Air­ways, would mean a more ex­pen­sive rein­sur­ance pro­gramme and a change in busi­ness model. So where to from here? With 25 per cent mar­ket share, San­tam Avi­a­tion will bat­tle to find growth in South Africa. “The money is in Africa. Nige­ria, for in­stance, has one of the largest pri­vate jet col­lec­tions in the world, due in some part to its enor­mous film in­dus­try,” says God­den, who adds that he will be cau­tious in the man­ner risks are ap­proached in Africa. In­ter­est­ingly, some in­ter­na­tional bro­kers are look­ing to place busi­ness with South African in­sur­ers, due to its com­pet­i­tive rates, which opens up fur­ther op­por­tu­nity. Also on the hori­zon is the po­ten­tial in­tro­duc­tion of drones in South Africa. As un­manned aerial ve­hi­cles, some drones can fly as high as aero­planes. “These will likely soon be in­tro­duced into the South African mar­ket. Com­pa­nies like Eskom could use them to sur­vey power lines, while the Parks Board could use them to mon­i­tor poach­ers,” God­den ex­plains. “We are look­ing at de­vel­op­ing a prod­uct for this equip­ment, but it de­pends how quickly they are adopted here and who utilises them.” Change is in­evitable, but some things will stay the same for San­tam Avi­a­tion, like its com­mit­ment to pay­ing claims. “We don’t look for rea­sons to re­pu­di­ate claims. I could prob­a­bly count the num­ber of claims we have re­pu­di­ated in my time here on two hands,” says God­den, whose team en­gages with the Civil Avi­a­tion Au­thor­ity around pilot train­ing and air safety. Cou­pled with its com­mit­ment to train in­de­pen­dent bro­kers on avi­a­tion risk, San­tam Avi­a­tion will con­tinue play­ing a part in keep­ing the in­dus­try well above ground.

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