Risk of Eskom grid collapse signals end of cheap insurance
in as many years coupled with the once unthinkable possibility of a power grid collapse have spooked reinsurers in South Africa, spelling an end to cheap coverage.
We’ve had the three biggest catastrophe events that this market has ever had in terms of insured losses That’s now helping add higher insurance premiums to the growing list of woes South Africans are already struggling with and could leave many exposed to heavy losses in the event of a power grid failure as reinsurers curtail coverage.South Africa’s relatively wealthy, developed economy and nearly three decades of political stability helped drive industry growth and draw in reinsurers.
Floods, meanwhile, devastated KwaZulu-Natal last year. South Africa’s total economic losses from natural catastrophes hit R63-billion in 2022, according to Swiss Re Institute, the research arm of Swiss Re, one of the world’s biggest reinsurers. About R25-billion of those losses were insured, but years of soft market conditions and underpriced risk left insurers swamped and reinsurers on the hook.
“Large industry losses in recent years … have accelerated the need for insurance and reinsurance terms and conditions to return to global levels,” Mehta said. Paul Hanratty, chief executive of Sanlam, among South Africa’s biggest insurers, said he’d seen a two- to three-fold jump in reinsurance premiums in just the past five years. “Which is staggering to think about,” he said, adding that the knock-on effect for consumers was two-fold as reinsurers are not only increasing rates but also scaling back on events they cover. “So, the cover has reduced, and the premium has gone up. Now you are paying 30-40% more for much less cover.
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