KZN floods the largest disaster in Santam’s history
South Africa’s largest short-term insurer, Santam, says the recent floods in KwaZulu-Natal qualify as a “one in 25-year event”, according to its its internal modelling. And these floods were “by far” the largest natural catastrophe in Santam’s history.This means the disaster was more severe on the insurer’s pocket than the 2019 Durban Easter floods that left 89 people dead; the 2017 Knysna fires; the flash floods in Durban and Gauteng, also in 2017; or the flooding on the Garden Route in November 2021.These recent floods washed away houses, roads, bridges and business premises, leaving thousands of people homeless and forced into temporary shelters.
According to KwaZulu-Natal Premier Sihle Zikalala, who spoke during the receipt of humanitarian aid from the Embassy of Qatar on Sunday, damage to public infrastructure alone - including schools, bridges and roads - is currently estimated at R25 billion. Businesses incurred damages estimated at R7 billion. This doesn’t yet take into account damage to residential properties.
Santam said as the extent of the damage was still being assessed, it was also reviewing its insurance exposures and liability.
Its current best estimate is that Santam’s gross exposure is R3.2 billion, and this number does not even include the more recent flooding that took place in May.
But, because its reinsurers will foot most of the bill, Santam will be out of pocket by about R500 million.
“Santam’s reinsurance programme provided effective protection against this natural catastrophe, limiting the net impact to approximately R500 million, including reinsurance reinstatement premiums,” wrote the insurer in its trading update on Wednesday.
Damage
Due to these floods, Santam’s conventional insurance business reported a negative net underwriting margin, meaning that it paid out more in claims than it collected in premiums.
As if the floods had not done enough damage, Santam said there were also some large commercial fires in the first quarter, which affected its commercial and personal intermediated business’ underwriting profits.
The insurer is also no longer getting the relief of reduced car insurance claims like it used to in the early days of South Africa’s lockdown.
It said the claim trends had since “normalised” and there had been an increase in vehicle accidents. But the company is doing something to ensure these increased claims don’t plunge it to massive losses.
“Underwriting actions to address the increase in claims frequency and claims inflation have been implemented since the start of 2022,” said Santam.
If it weren’t for the elevated claims, Santam’s year might have started on a high note as its businesses have been selling more. T
he insurer’s conventional insurance business grew written premiums by 7% in the first four months of 2022. Only MiWay and Shriram General Insurance recorded muted growth in gross written premiums. -Fin24