South African insurer Santam has approved up to R1 billion (US $61 million) of relief payments for businesses hit by COVID-19 related disruption following an order by the country’s regulators.
The Financial Sector Conduct Authority (FSCA) and the Prudential Authority (PA) have told non-life insurers to make one-off payments to policyholders hit by the pandemic as the market awaits a court decision on business interruption (BI) claims.
Santam said its relief payments will mainly support its small and medium sized commercial policyholders in the hospitality, leisure and non-essential retail services industries, while large corporate clients will be excluded.
The R1 billion relief equates to 70% of two months’ value of the sum insured for Santam’s policyholders in these industries, based on a view that businesses would have experienced variable expense savings during the lockdown.
The two months are indicative of the period where most businesses were impacted by the restrictive trading environment imposed by the Level 4 and 5 lockdown in South Africa.
Santam added that the payments will be set at a minimum of R25,000 ($1,520) and a maximum of R1.5 million ($91,000) for individual CBI policyholders.
The FSCA and PA have confirmed that policyholders will not be required to return the payments if insurers win in court, although the value will be deducted from the total claim if policyholders win.
The regulators hope this action will help to restore trust in the insurance industry, which has come under fire for refusing to pay out on claims linked to the pandemic.
For its part, Santam continues to hold the view that the national lockdown is not an insured peril covered under its policies.
It further noted that its reinsurance program will only respond to claims covered under the terms of its policies, and any reinsurance claims made under a different interpretation of the policy wording would have to be definitively decided by the national courts.
