National Treasury and the South African Special Risk Insurance Association (Sasria) are working on ways for the state-owned insurer to reintroduce the R1 billion in additional cover for large corporates, Finance Minister Enoch Godongwana said on Tuesday.
He said providing the additional cover was key to unlocking investment in infrastructure by the private sector.
Godongwana was responding to a question by DA finance spokesperson Dr Dion George, who asked whether Sasria would receive further cash injections from the state.
Sasria withdrew its optional excess of loss cover because expensive reinsurance made it commercially unsustainable to continue doing so.
The current limit is R500 million.
Lloyd’s of London, which leads the reinsurance market, hiked its Sasria reinsurance premium by more than 1 000% and other reinsurers followed suit. Reinsurers think it is likely there will be a repeat of the July 2021 unrest in the next two or three years.
Answering Dr George’s question, the minister said it was unlikely that Sasria will request another capital injection over the next two years, although this was subject to claims not exceeding a loss ratio of 58% over that period and reinsurance arrangements remaining the same.
“Therefore, in the event that an event similar to [the] one of July 2021 occurs in addition to a loss ratio of 58%, Sasria may need capital injections of approximately R100m for a loss of R5bn, R2.7bn for a loss of R10bn, and R8.4bn for a loss of R15bn. This excludes any assistance that Sasria might require to provide large corporates with an additional cover of R1bn over and above the current limit of R500m,” Godongwana said.
The government injected R22bn into Sasria to enable it to meet claims to the value of R33.833bn arising from the July 2021 unrest.
On 13 July, Sasria said it had settled 21 000 claims totalling more than R24bn. There were 6 800 claims outstanding with a total value of R7bn.
