International reinsurers operating in the South African market have been providing coverage to local businesses under strict and punitive conditions since the 2021 riots that led to widespread looting of businesses and shops.
This is according to the South African Special Risk Insurance Association (Sasria) executive manager for stakeholder management, Muzi Dladla.
“They still do insure in South Africa. But they have made the reinsurance terms a bit more punitive. You can translate that to the market getting harder in reinsurance terms. They do provide that cover, but their terms might not be favourable.”
He said insurers now typically charge more than before for certain categories of coverage and put much stricter underwriting conditions and lower commissions in place for that coverage. He said the prevalence of natural disasters leading to insurance claims also played a role.
“South Africa is one of those markets that is open and transparent about its risks, perhaps too open and critical, to its detriment. In one of the reinsurance markets visits, they gave us a paper written by a South African institution that was disparaging South Africa as a high-risk region with poor governance.”
He said Sasria had noted that the subscription of reinsurers for catastrophe cover had been reduced to levels that could vary between 30% and 50%.
“What this means for consumers is that if you used to have 100% coverage for floods for a house, now you might get less cover, especially if your house is on the flood line and the owner of the house will be carrying the risk. It creates a cover gap in the market for consumers. You might have to pay more for less cover.”
Businesses balking at less favourable terms for insurance are expected to pivot spending towards the physical security of their premises and assets as the festive season draws near.
Trellidor sales executive Damian Judge said the urgency for businesses to invest more in physical security on their premises was being fed by a declining appetite for insurers to cover them for certain categories of loss as perceptions of crime worsen.
“Unfortunately, the damage done by the 2021 riots is real from an insurance landscape. We’ve had more and more international underwriters pulling out of South Africa over the last two years, so there aren’t many people willing to take on the risk and that will start to increase insurance premiums and the cost of doing business.”
He said Trellidor had worked to enhance its products after footage from the 2021 unrest highlighted significant weak points in several security barrier solutions, particularly traditional roller shutter doors.
The Financial Sector Conduct Authority (FSCA) said the South African Insurance Association would publish a survey in early 2025 on the changes in the international placement market and whether members noticed any change after the 2021 riots.
“It is also important to note that non-life insurers provide coverage for specific perils within the country, but they do not extend their coverage to civil commotions, public disorder, strikes, riots and terrorism.”
The FSCA said it observed that the rise in the emergence of certain risks such as climate change and electricity shortage had led to proactive responses from both reinsurers and insurers.
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