How do we sleep while our beds are burning?

According to research, 2016 was the year most affected by natural disasters. This has not only affected South Africa, but international locations as well, and has a direct impact on the insurance industry as clients need to be compensated for the losses they suffered.

Reducing the risk of wild fires

The recent fires raging in Somerset West, Western Cape, have highlighted the risk of wild fires and the significant damage they can cause.

According to an article on the TimesLive news website, the damage from the recent fires is up to R60 million, making this is one of the larger fires in recent history. This has made it increasingly clear that there is a need to reduce the risks that lead to fires starting and has stressed the importance of having the right cover should a fire occur.

Commenting in the article, Carolyn Thompson, Head of Personal Lines at Mutual & Federal said that South Africa usually has a vast amount of dry biomass after the dry season, which makes the months thereafter a high risk time for fires.

The severe drought and strong winds in the Western Cape makes the risk even higher. During this time, it is even more important to take preventative measures and to be strict about activities that could start fires, such as smoking and camp fires.

Become vigilant

In a release to the media, Dawie Loots, CEO of MUA Insurance Acceptances, said that consumers who live in areas that are known to face a higher risk of fires spreading, should have proper insurance cover in place to ensure that any losses are financially covered.

Protecting a major export
The recent fires in the winelands of the Western Cape has again brought the issue of the wine producer’s risk to the fore, with a number of wine farms being adversely affected.

In a press release to the media, Shehnaz Somers, Head of Commercial Underwriting at Santam said the company is still assessing the damage and loss as a result of fires spreading to well-known vineyards and guest farms in the winelands and surrounding areas.

“Our claims team is assessing about 50 claims related to the recent fires, most of which are related to buildings and vineyards. However, it is still too early to report on the exact extent of the damage. We know that last year, runaway fires destroyed vineyards in Stellenbosch‚ Overberg‚ Simonsberg and Kogelberg early in 2016 resulting in losses estimated at around R240 000 per hectare. This included the loss of income to the farmers and the additional labour costs required to re-establish the vineyards,” said Somers.

Somers added it could take between five and seven years for an average wine vineyard to become productive again after a loss or significant damage. The loss of a vineyard can have a major impact and knock-on effect on the financial viability of the farm operation as a whole.

“The destruction of vineyards by fire, crime or weather-related events also has a significant impact on the overall production volumes which in turn places international exports and revenues - and ultimately the livelihoods of those communities engaged in the wine producing sector at risk.”

Spreading the risk

Currently, there are about 98 597 hectares of vines producing wine grapes under cultivation in South Africa – an area covering some 800 kilometres in length.

Thanks to strong exports to large parts of Europe and America, the South African wine industry is a significant foreign exchange earner for the local economy. The South African Wine Industry Information and Systems (SAWIS) confirms that local revenues from the wine industry contributes more than R36 billion to the national gross domestic product and provides employment to more than 300 000 people.

Most local wine farmers have insurance protection against weather-related incidents. Industry reports show that a number of them are still grappling with the consequences of a protracted drought in early 2016.

“Since the majority of local wine farms are not limited to one single varietal, a number of producers have more than one estate which is often spread over different districts or regions in order to get better diversity in the taste of their grapes. Resultantly, the wine producer’s risk is also spread geographically, which can serve to mitigate the risk somewhat,” said Somers.

The risks to the wine producer are also present in the supply and distribution chains to which he or she is inextricably linked.

Particular risks

Somers explains that when it comes to insurance, the local wine industry presents some very particular risks.

“Apart from the standard cover for theft, fire and severe weather related incidents, wine farming requires a type of specialist cover to provide financial security to the producer - from planting through to production, bottling and distribution. These risks include fire damage to plant materials, uprights and trellises as well as any loss of revenue or income that the farmer may suffer should his vineyard be destroyed by fire,” said Somers.

Once the grapes have been harvested, risks originating from accidental damage or loss during the wine making process itself are covered through an accidental damage cover that offers protection should the wine become contaminated.

Extended liability cover protects the farmer or wine producer against any additional legal liability or claims that may result from defective or contaminated products or in the event that it is recalled from shelves or export containers.

As El Nino departs, we are possibly entering into a La Nina cycle. This will bring heavy rains and possible floods. Therefore, the possibilities of natural disasters have not disappeared, the nature of the risk changes. the industry needs to be more vigilant now than ever.