Santam fears costs will go up

The cost of the damage to property during looting that rocked parts of KwaZulu-Natal and Gauteng in early July will potentially push up reinsurance rates, says the country’s largest shortterm insurer, Santam.

The cost of the damage to property during looting that rocked parts of KwaZulu-Natal and Gauteng in early July will potentially push up reinsurance rates, says SA’s largest short-term insurer, Santam.

Reinsurance refers to insurance a primary insurer purchases with another insurer to mitigate risk to itself.

“What worries me most about [the riots] is the impact they will potentially have on reinsurance rates in SA. We are all very dependent on reinsurance purchased in international markets and this may have an impact on how reinsurers view risks in SA, possibly making it more expensive,” Santam CEO Lizé Lambrechts said.

The cost of the damage to property and looting amounted to billions of rand and dented SA’s image to potential investors. However, Santam does not provide cover for riots, strikes and public disorder.

Still, short-term insurance companies have been at the coalface of the Covid-19 pandemic, which has disrupted businesses, triggering a flurry of claims since the first case was detected in the country about 18 months ago.

Santam said on Thursday it is making good progress in processing business interruption claims, which have been the cause of much bitterness among businesses in the hospitality industry.

At the heart of the issue is whether businesses could claim for damages resulting from state-imposed hard lockdowns as opposed to damages resulting from an actual outbreak of Covid-19 at its premises.

Releasing its first-half results to end-June, Santam said it had paid R700m to affected policyholders by the end of August 2021, in addition to R1bn paid in interim relief in August 2020.

Santam is still awaiting the outcome of a court appeal regarding the length of time over which it has to pay out full business-interruption claims to Ma-Afrika Hotels and Stellenbosch Kitchen.

The Western Cape High Court had ordered that Santam settle the claims from two businesses for a full 18 months instead of the three months Santam was in favour of. The Supreme Court of Appeal judgment is expected to be handed down later in September, after the matter was heard last week.

Santam said the claims environment normalised in the six months to end-June, compared with the same period a year ago when the pandemic and lockdown restrictions triggered a flurry of claims.

“The positive impact of limited natural catastrophes on the loss ratio was partly offset by a number of large corporate fire claims and an increase in the motor loss ratio compared to the 2020 hard lockdown period,” it said in a statement.

Headline earnings per share rose 30% to R8.63 and the company restored its interim dividend payout, with shareholders set to receive R4.32 per share.