South Africa’s state-owned insurer, Sasria, has reported that it now anticipates the bill for claims from civil unrest and rioting in the country in July could reach as much as US $1.34 billion.
At the same time, Sasria told Reuters that it will be raising its premiums for political violence protection, to combat rising reinsurance costs following the days of civil unrest in the country in July.
The rioting, during which more than 300 people and some 3,000 stores were looted, was triggered by the jailing of former President Jacob Zuma.
Sasria now says that some 95% of expected insurance claims have been registered, and it now estimates that the total bill could reach R19 – R20 billion (US $1.27bn to $1.34bn).
Back in July, Sasria estimated that insured losses of between 7 billion rand and 10 billion rand ($481 million to $683 million) could materialise from the days of unrest.
So the latest announcement today is a significant increase on that figure.
Mr Cedric Masondo, Sasria’s Managing Director, commented, “By the end of the week, we would have paid R2 billion between us and agent companies. Our target is to settle all valid small and medium sized claims in the next six weeks.”
Insurer Sasria was launched in 1974 to provide cover for risks relating to political violence after private companies stopped underwriting these lines of business during apartheid.
It’s the only carrier in the country that covers political violence so will be responsible for any claims filed, meaning it relies heavily on reinsurance to help cover the costs.
The insurer told Reuters previously that although its reinsurance cover runs into the high single digits and can fund up to 10 billion rand ($683 million) of claims from its own balance sheet, it only covers customers up to a threshold of 500 million rand ($33 million).
This means that some of the larger companies may have to deal with some of the loss costs themselves, if they have suffered significant damage.
But as a result of the recent unrest in the region, it appears as though the cost of reinsurance has increased for Sasria, which in turn is leading the insurer to hike its own premiums to cover the additional expense.
Speaking to Reuters by phone, Sasria’s managing director, Cedric Masondo explained that, “We will increase the rate driven by the increase in reinsurance,” continuing to note that the timing had yet to be finalised.
Reuters also reports that Masondo declined to say by how much premiums are set to rise, but does point to a circular sent to Sasria agents which says the increase would take effect from October 1st, 2021.
The decision means potentially higher premiums for companies across South Africa that require protection against political violence, although Masondo told Reuters that the firm was still deciding whether all clients would be impacted.
As Sasria is the only carrier that provides such cover, those in need will be left with little choice but to pay the higher prices or risk being unprotected at a time when stability is fragile.
Property Claim Services (PCS), a Verisk business, previously said it was looking at an insurance industry loss of between US $600 million and $1 billion from the South Africa riots, PCS Head Tom Johansmeyer told us in July.
