Cape weather fury hurts in­sur­ers

The Star Early Edition - - COMPANIES -

SOUTH Africa’s prop­erty and ca­su­alty in­sur­ers face an even tougher year than ex­pected af­ter Cape Town ex­pe­ri­enced its worst storm in 30 years and dozens of fires en­gulfed the re­gion around the town of Knysna this week. The in­sur­ers, in­clud­ing San­tam, Old Mu­tual’s Mu­tual & Fed­eral and Rand Mer­chant In­vest­ment Hold­ings’ OUT­surance unit, are al­ready be­ing bat­tered by an econ­omy that slipped into a re­ces­sion in the first quar­ter, the coun­try’s credit rat­ing down­grade to junk sta­tus, con­tin­ued po­lit­i­cal tur­moil and unem­ploy­ment at a 14-year high. “Profit will be un­der pres­sure,” said Richard Has­son, an an­a­lyst at Elec­tus Fund Man­agers in Cape Town. “In a weak eco­nomic en­vi­ron­ment, such as low gross do­mes­tic prod­uct growth and in­creas­ing unem­ploy­ment, claims typ­i­cally pick up, which will not be good for them. The re­cent fires and storms will af­fect the com­pa­nies.” The storm in Cape Town claimed at least nine lives, blew roofs off houses, flooded build­ings, downed power lines and forced schools to close on Wed­nes­day. About a five-hour drive to the east, around the wealthy towns of Knysna and Plet­ten­berg Bay, more than 26 fires broke out late on Wed­nes­day, with “se­vere dev­as­ta­tion” in at least 12 suburbs, ac­cord­ing to lo­cal gov­ern­ment of­fi­cials. The ex­pected in­flux of claims may not push the big­ger prop­erty and ca­su­alty in­sur­ers into losses for the year, but com­pa­nies like Zurich In­surance South Africa and Auto & Gen­eral In­surance may strug­gle, Adrian Cloete, an­a­lyst at PSG Wealth, said in Cape Town. The rein­sur­ance pro­grammes will help to ab­sorb the im­pact, although un­der­writ­ing mar­gins are likely to con­tract, he said. San­tam, which on May 31 said un­der­writ­ing re­sults are un­der pres­sure, dropped as much as 2.9 per­cent to its low­est level on a clos­ing ba­sis in al­most four months. Old Mu­tual de­clined as much as 1.1 per­cent and RMI fell more than 2 per­cent. – Bloomberg

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