The worst catastrophe in insurance history

As Santam’s latest television advert asks “what could go wrong?”, its interim financial results reflect the realities of catastrophic weather events.

It labelled the severe storm and devastating fires – that battered Cape Town and razed parts of the Southern Cape in June – as the worst catastrophic event in SA insurance history.

The damage is expected to be around R3 billion, with Santam clients already having submitted claims totalling R800 million. It had a net impact of R234 million on the group during the six months ended June 30 2017.

Santam CEO Lizé Lambrechts said the insurer had reserved fully for claims arising from the events in the interim period. A large portion of the claims have already been paid out, with the more complex claims currently under review.

Uncertainty as to whether the storm and fire are to be treated as one event or two separate events has led to complications in agreeing to the losses with reinsurers. Due to the uncertainty, the losses were accounted for as two events in the group’s interim results. Lambrechts told Moneyweb that treating the losses as one event would allow the group to claim around R70 million more from reinsurers.

An increase in large property claims, also related to damage caused by fires, weighed on the underwriting performance of its property division. It reported an underwriting loss of R415 million down from a profit of R18 million recorded in the first half of 2016. It suspects the claims arise from maintenance and safety standards being compromised during tough economic times. It’s working to alleviate the risk.

A turnaround in its domestic crops and motoring business classes acted as a buffer.

The severe storm and devastating fires – that battered Cape Town and razed parts of the Southern Cape in June – was the worst catastrophe event in SA insurance history.