South Africa’s Upcoming Election Raises Risk for Non-Life Insurance Sector

As South Africa gears up for its impending general election, the non-life insurance sector is bracing for potential increased risks. Historical instances have shown that political tensions can quickly spiral into civil unrest, leading to rioting, looting, arson, and other forms of violence. Such disturbances could severely impact businesses, causing them to shut down temporarily or permanently, lose revenue, or suffer from property damage and business interruptions. Consequently, businesses are expected to claim indemnity under their existing insurance policies for any such losses incurred.
Typically, coverage for business interruption losses stemming from strikes, riots, civil commotion, public disorder, and terrorism is provided by the South Africa Special Risks Insurance Agency (SASRIA). Nonetheless, there are situations where SASRIA coverage may not apply, or the coverage limits may be insufficient. In these cases, insurers might face claims for losses caused by perils that fall outside SASRIA’s coverage or exceed its indemnity limits.
Insurers are advised to review their policy terms to assess their potential exposure to these uninsured SASRIA claims. This is particularly important for scenarios where businesses might not suffer direct physical damage – usually a prerequisite for business interruption cover – but are still affected by civil commotion impeding access to their premises. Insurers offering prevention of access cover should closely examine the definitions of key terms in their policies, such as ‘damage’, ‘property’, and ‘vicinity’, among others. The determination of coverage will depend on several factors, including the definition of ‘damage’, geographical limitations, and whether the damage was the proximate cause of the prevention of access.
To avoid disputes over coverage during the election period, insurers are encouraged to proactively evaluate their risk exposure under existing business insurance offerings. Seeking prompt legal advice is recommended in cases of uncertainty or doubt, to effectively manage these significant risks.