Last year, the insurance industry staggered under the impact of Covid-19. Life assurers had to fork out billions in death claims, and non-life insurers were caught unawares when the courts ruled against them in terms of business interruption claims resulting from the pandemic.
This year, the scale of the unexpected looting and violence was such that Sasria, for the first time in its forty years of its existence, appears to be unable to meet its commitments.
Legalbrief reports:
National Treasury has revealed that the package of relief measures to support households and businesses affected by the Covid-19 pandemic and the recent violence in KZN and Gauteng will cost the fiscus R38.8bn. The biggest intervention is financial support for Sasria to help the state-owned short-term insurer to expeditiously honour claims from insured businesses that have suffered damages to their properties, notes a Daily Maverick report. Sasria will receive a R3.9bn cash injection from the government, said Treasury’s DG, Dondo Mogajane.
Sasria expects insurance claims arising from the recent looting and anarchy to be so daunting that it cannot independently fund insurance claims from its balance sheet. Claims from insured businesses are expected to be between R15bn and R20bn, but business partners at Nedlac expect claims to run to more than R30bn. Sasria only has about R12bn on its balance sheet. The financial help from the Treasury is a first for Sasria in its 40-year history as the state-owned insurer has relied on its healthy balance sheet and not government bailouts for survival.
The uninsured
Businesses that don’t have insurance and suffered damages would also get assistance from the government, says the DM report. Treasury said it is still auditing the number of businesses that don’t have insurance cover and working on an appropriate funding mechanism for them. But there are no firm measures on the table yet for uninsured businesses, which are estimated to be many because insurance is costly and still viewed as a grudge purchase.
Mogajane said the R38.8bn relief package will be funded through Treasury’s existing funding framework and the reprioritisation (or shifting) of funds from departmental budgets. Mogajane said Treasury won’t increase its borrowing requirements or subscribe to new debt in a bid to fund the R36bn. It is likely to fund the relief package from its windfall of about R100bn thanks to the recent commodities price boom. The reprioritisation of government budgets will free up additional funding of R250m for the SAPS and an additional R700m for the SANDF to ‘ensure that peace and stability return to communities’. Another drastic proposal Treasury is weighing up is allowing financially distressed consumers to cash out a portion of their pension savings. The purpose of this is to help consumers free up cash – a suggestion opposed by business partners at Nedlac as they believe consumers would raid pension savings to fund their lifestyles of consumption.
Good day how would you be able to claim for an insured that is uninsured for a loss?
Hi Celeste. Apparently, the government will bail those out who were not insured. So much for paying for insurance. Or not paying. Kind of defeats the objective, does it not?
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