Sasria’s R15bn may not be enough to pay unrest claims

Bankers pitching in to help those not covered by the state insurer

Claims for damages related to the recent violent unrest could go well above the R15bn that the state-owned South African Special Risks Insurance Association (Sasria) has said it has available, and the government may have to come in with more than the R3.9bn it allocated to Sasria as part of the relief package announced this week.

Industry players say Sasria has been responsive to the need to pay out claims quickly, and banks and short-term insurers have rallied to help it process the huge volume of claims and get the money out as fast as possible to businesses hit by the unrest.

There are still concerns about how to reach the many thousands of uninsured, unregistered entrepreneurs whose businesses were looted or destroyed.

But bankers are working on potential solutions that could complement the R2.3bn that the state has set aside to assist small businesses not covered by Sasria.

The Banking Association of SA (Basa) has urged affected clients who were in good standing before the unrest to talk to their banks if they need cash flow relief, while the South African Revenue Service (Sars) will also allow some deferral of tax payments, as it did in last year’s hard lockdown.

Sasria CEO Cedric Masondo said this week that Sasria has R9.7bn in assets and holds a further R6.5bn of reinsurance, which would enable it to pay out on claims up to R15bn — so it could not look to pay out on the full R15bn-R20bn at which it estimates claims.

President Cyril Ramaphosa said last Sunday that the government would make sure insured businesses would be covered by Sasria and ensure that Sasria was able to honour all its obligations.

As part of the R38.9bn relief package for the unrest and the continued lockdown, finance minister Tito Mboweni this week announced financial backing of R3.9bn to the state-owned insurer, which effectively has a monopoly on providing cover for damage caused by riots, strikes, unrest and public violence.

Mboweni said, however, that the amount might be revised as events unfolded. He added: “The crisis affords us an opportunity to relook at the depth and coverage of Sasria and revamp, reimagine and repurpose it.”

Insurance Claims Africa CEO Ryan Wooley said on Friday that while the extent of the unrest-related damage was still unknown, from what companies were seeing on the ground indications were that total claims could go as high as R20bn-R30bn. Sasria provides cover up to a maximum of R500m per claim, though large corporates can buy “excess of loss” policies for an additional R1bn. Wooley said even 20 large companies with big losses would already total R10bn in claims.

He said Sasria had been exceptionally responsive and had engaged with claimants. Short-term insurers are helping with lossadjusting resources to ensure claims are processed timeously and Basa has said banks will provide bridging finance to fast-track cash to clients entitled to Sasria payouts.

But Wooley said Insurance Claims Africa — which led the campaign last year to get short-term insurers to pay out to clients with business interruption policies for lockdownrelated losses — is worried that while some of the larger short- term insurers, and Old Mutual in particular, have learnt from last year’s lessons and are being more helpful and receptive, the focus on helping Sasria could distract them from meeting their other claims obligations.

FNB’s Jacques Celliers said the banks are working to see what they can do — they can use big data to help identify even uninsured businesses that were impacted and can take on credit to buy stock and rebuild.

“We have customers with no insurance but they have our payments devices and we are busy finding as much data as we can to see whether we can extend a bit of credit to them to enable them to restock so that they can trade, and get back on their feet,” Celliers said.

“We are using big data and putting it through our models, and we can reach out to businesses that have been affected.”

While some have urged a revival of the loan guarantee scheme that the government and the banks put in place last year, Basa CEO Bongiwe Kunene said this week a key lesson from the scheme was that entrepreneurs were not willing to take on additional debt in times of crisis.

The loan guarantee scheme, which Ramaphosa initially pitched at R200bn, ended on July 11, having made 15,000 loans with a total value of R18.43bn, with 82% of the loans going to businesses with turnovers of between R1m and R20m, Kunene said.

As part of the package detailed by Mboweni, Sars will allow small and medium enterprises affected by the unrest or the latest lockdown restrictions to defer up to 35% of their PAYE liabilities for three months.

It will also defer excise taxes for three months for tax-compliant businesses in alcohol-related sectors.

The expanded employment tax incentive has also been reinstated for four months to incentivise employers to retain employees earning less than R6,500 a month.

The Banking Association of SA has urged affected clients to talk to their banks if they need relief