The state-owned insurance company that covers risk associated with civil unrest and strikes is in talks with the Treasury for more funds to strengthen its financial position and capitalise the business.
The solvency of the SA Special Risk Insurance Association (Sasria) was secured by the R14.9bn granted by the government so it could cover claims arising from the July unrest.
But Sasria executive for stakeholder management Muzi Dladla said in an interview on Wednesday that Sasria was hoping for more funds to create an extra buffer and enable it to withstand any extraordinary events in future.
He would not give the extra amount being requested and insisted that Sasria’s assets now exceed its liabilities and it was a going concern. It could pay all claims.
Sasria is also working to transfer more risk to its reinsurers.
Damage from the July unrest, which saw shops, factories, pharmacies and warehouses looted and gutted, is estimated to total about R50bn with Sasria having received claims amounting to R32bn. So far, R16bn in claims has been paid out.
Dladla said the unrest had a significant impact on Sasria’s solvency and liquidity position. In a normal year it would get from 1,000 to 3,000 claims, but this year it had received just more than 14,000 claims due to unrest.
To adjust its premiums to risk and the value of assets, Sasria has announced a rate increase for certain classes of businesses from January 1 2022.
Classes of business where there will be no rise include fires for domestic property, tertiary institutions and small and medium enterprises, as well as cars for private use. There will also be no rise in premiums for business-interruption policies.
Premiums will increase for light and heavy commercial vehicles, minibuses and taxis, with the premiums on heavy commercial vehicles being particularly high.
A new rating class for municipality-related risks has been introduced and a separate rating structure for commercial office fires, which has been the class of business hardest hit in terms of the severity of claims.
In a notice to agents and intermediaries Sasria says that it conducts an annual review of premiums and factors in loss patterns over a number of years.
“The recent catastrophe event losses were considered but they are not the basis on which the increases were determined. The affected lines of business have traditionally been affected by high frequency and severity of claims. Lines of business that have not portrayed an increase in losses over the past three to five years are excluded from the increase,” the notice said.
Dladla said the frequency of burning and looting of trucks over the last few years required a review of the rating structure for heavy commercial vehicles to reflect this risk. Trucks were burnt and looted by protesters aggrieved by employment of foreign truck drivers.
In the past six years (excluding the July unrest) the average loss ratio on heavy commercial vehicles was about 240%, which meant that for every R1 it received it was paying out R2.40.
In 2020 alone, the loss ratio went up to 664%. There have also been high claims on this class of business over the past few years.
“The premium that we were getting on the trucks was just not adequate to cover the risk. We needed to do something about it because the risk profile had changed,” he said.
Whereas light commercial vehicles, minibuses and taxis are now rated at a flat rate of R45.39 a year, they will be rated on a rating scale based on the value of the vehicle.
The current flat rate of R39.47 for commercial vehicles will change to R61.41 for a R100 000 vehicle and R1,228.19 for a R2m vehicle and for taxis from R39.47 to R50 for a R100,000 vehicle and R370.38 for a R2m taxi.
The present premium on a heavy commercial vehicle valued at R100,000 is R16.34 and for a R2m vehicle R326.78 and the new premiums will be R300.05 and R6000.98 a year respectively. “It sounds like this increase is significantly high, but in relative terms it is not,” Dladla said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.