The South African Special Risk Insurance Association (Sasria) says it is working to reintroduce its comprehensive wrap cover for large corporates.
This is according to the state-owned company’s integrated report for the 2023/24 financial year, which it released this week.
Sasria discontinued its optional excess of loss cover of up to R1 billion in 2022 in response to soaring reinsurance rates internationally.
Nolwandle Mgoqi, the chairperson of Sasria’s board of directors, said in the report that the non-life insurer’s new five-year strategic plan includes the reintroduction of additional cover above the current limit of R500 million.
Sasria’s chief executive, Mpumi Tyikwe (pictured), said the rising cost of reinsurance is the biggest challenge to restoring the financial health of the entity, which was hard hit by unrest in KwaZulu-Natal and Gauteng in July 2021.
“While this impacts insurance markets globally, cost increases are particularly high in South Africa owing to scepticism about the market following July 2021. Sasria is also not immune to global events, including ongoing conflicts [in] Ukraine and the Middle East, which place added pressure on the reinsurance market,” Tyikwe wrote.
The integrated report states that the reinsurance industry entered a “hard market” in 2022, with a significant reduction in global reinsurance capital, leading to significant price increases.
“The hardened reinsurance market has a direct impact on our operations and financial position and may require that we find alternative risk transfer mechanisms to lessen our retained risk.”
Expanded coverage
Mgoqi said the new strategic plan also includes an initiative to amend the Conversion of Sasria Act to allow for an expanded service offering.
“The intent is to develop a natural disaster pool in the medium to long term, in partnership with the private sector, to provide cover for floods, droughts, and other climate-related impacts.”
Finance Minister Enoch Godongwana, in his foreword to the integrated report, also mentioned plans to expand Sasria’s coverage beyond risks such as civil commotion, public disorder, strikes, riots, and terrorism.
During the reporting period, Sasria’s engagements with the government, regulators, and other stakeholders centred on possibly extending Sasria’s coverage to include climate risks, extreme weather, and cyber-attacks, he said.
Godongwana said the financial consequences of the 2021 unrest have resulted in a much closer working relationship between National Treasury and Sasria, and “we continue to explore opportunities to strengthen the entity’s role”.
The 2021 unrest resulted in R31bn in claims, which far exceeded Sasria’s reserves. Sasria’s shareholder, National Treasury, provided an equity injection of R22bn during 2021/22. This facilitated the settling of these claims and recovered Sasria’s solvency cover ratio to the regulatory required levels.
Improved financial performance
Chief financial officer Dirk Kunz said Sasria’s financial performance and position improved significantly for a second consecutive year, allowing the company to rebuild its assets under management – or reserves – to R13.34bn from R10.73bn in the previous year.
In October last year, Tyikwe told the National Council of Provinces’ Select Committee on Finance that Sasria would like to accumulate reserves of at least R30bn.
A 17.67% increase in the premium rate, a positive claims experience, and improved investment returns saw Sasria record an IFRS 17 restated pre-tax profit of R3.332bn in 2023/24 (2022/23: R3.746bn).
Other key financial metrics for the financial year were:
- Insurance revenue: R5.38bn (2022/23: R4.46bn)
- Net insurance service result: R1.98bn (R3.45bn)
- Investment income: R1.01bn (R0.69bn)
- Net cost of reinsurance: R1.33bn (R1.09bn)
Sasria once again did not pay a dividend to the state. It paid R11.1bn in dividends from 1998 to 2021.
Reduction in claims
Sasria said it experienced a significant reduction in claims compared to the previous year. Gross claims incurred (excluding July 2021 adjustments) came to R1.08bn (2022/23: R1.42bn), and net claims after reinsurance recoveries were R481m (R1.5bn).
The report said there were few political protests in South Africa in the 2023/24 financial year, resulting in a small number of claims. There was also a decline in strikes in 2023, with 83 recorded incidents compared to 86 in 2022. There was, however, an increase in the number of service delivery protests during the year.
