Rand Merchant Investment Holdings (RMI) said on Wednesday that majority-owned subsidiary Outsurance has largely settled its Covid-19 business interruption claims.
The latest development is likely to clear up uncertainty about the unlisted short-term insurance company while some of its competitors are under pressure to resolve the matter that has cost them billions of rand in settlement claims and reputational damage.
Insurance Claims Africa (ICA), which represents about 900 complainants in the tourism and hospitality sector, has been embroiled in a legal battle with insurance companies for about a year over the payout for businesses that bore the brunt of the pandemic.
The insurance companies initially refused to recognise the validity of the claims, arguing that government-imposed lockdowns were the cause of the business interruption, and not the pandemic itself. However, the courts ruled in favour of the claimants.
Though admitting legal certainty, some are still disputing the quantum and indemnity for which they are liable. Santam has asked for leave to appeal against a 2020 judgment in favour of ICA and Ma-Afrika Hotels that found it liable for 18 months’ cover and forced it to more than double its provisions. The matter is still pending.
RMI said Outsurance has settled its business interruption claims with clients in the tourism and hospitality sector. The insurer had made a R200m provision for such claims.
RMI, which holds 89% in Outsurance, also holds a 25% interest each in Discovery and Momentum Metropolitan, which are both in the financial services sector, as well as a 30% stake in British short-term insurer Hastings.
Discovery maintained its overall Covid-19 provisions at R3.4bn when it released its fiscal first-half results for the six months to end-December at end-February. This was in line with provisions indicated when Discovery announced its results for the year to end-June 2020 as the utilisation of these previously established provisions had been relatively low in the interim period.
Momentum Metropolitan Holdings, by contrast, increased Covid-19 provisions R655m net of tax for the six months to end-December, adding to the R983m in provisions announced in its results for the 12 months to end-June 2020 earlier in March.
Standout performer
That combined provision amount of R1.638bn should be sufficient to cover it for three waves, provided the third expected spike in infections and deaths does not exceed levels experienced in the first wave, Momentum Metropolitan CEO Hillie Meyer told Business Day at the time.
Outsurance — the operations of which straddle SA, Australia and Namibia — was the standout performer in RMI’s portfolio in the six months to end-December.
Outsurance benefited from the lockdown measures aimed at controlling the spread of the virus in 2020. The ban on the sale of liquor decreased alcohol-related car accidents and subsequent claims. The increased number of citizens who stayed at home to avoid being infected with the virus also led to fewer cars than usual on the road, leading to fewer accidents and claims.
The smaller number of motor accident claims and reduced natural disaster-related claims in Australia boosted normalised earnings for Outsurance 23% to R1.4bn in the six months to December, RMI said on Wednesday.
Outsurance was also counting on its strategy to expand its insurance product range and distribution channels. It formed a partnership in May 2020 to distribute its funeral product across Shoprite’s retail footprint.
Karl Gevers, portfolio manager at Benguela Fund Managers, said Outsurance’s performance was solid.
“The good news is that they have pretty much settled all business interruption claims. The rest, Discovery and Momentum Metropolitan, we already knew about in terms of performance,” said Gevers.
Its gross written premiums increased 18% despite the low premium inflation experienced across the motor insurance portfolio.
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