Businesses should top up their insurance cover in the face of rising unrest and looting risks
The spate of violent protests and looting that saw hundreds of businesses and shopping centres destroyed across two provinces in July could well happen again and insurance experts are warning business owners to ensure they are adequately covered.
With socio-economic problems such as inequality, poverty and high levels of unemployment continuing to plague South African society, it is not inconceivable that some form of social unrest could be sparked again.
As a new entrant in the Allianz Risk Barometer 2021, political risks and violence now rank as the number five business risk in South Africa, demonstrating the significant threat this poses to companies in the current environment.
The July riots caused damage worth about R25 billion and claimed more than 300 lives when more than 200 shopping centres were looted in the KwaZulu-Natal and Gauteng provinces, according to the South African Special Risk Insurance Association (Sasria).
Sasria is the country’s state-owned insurance company that covers special risks like public disorder, riots and terrorism. However, Sasria’s policies typically cover claims of up to R500 million and businesses are encouraged to consider obtaining “riot wrap” insurance which provides additional coverage.
“Especially for large corporates and multinational organisations with global insurance programmes, Sasria’s R500 million limit may not be sufficient and they may require additional cover,” says Catia Folgore, senior underwriter at iTOO Special Risks Insurance.
Protect your business
According to Folgore, riot wrap is specifically aimed to provide coverage relating to profits, either gross or net, contingent business interruption and material damage.
“Wrap insurance is essentially ‘top up’ coverage that is offered by most private insurance companies that wraps around the Sasria Coupon and Assets Policy. So while most businesses are aware that Sasria provides primary coverage for damage stemming from civil unrest and political violence, fewer are aware that private insurers also have a role to play in this space,” says Folgore.
“A riot wrap provides additional coverage for loss of profits, contingent business interruption and material damage in excess of Sasria limits, both within South Africa and outside its borders.”
She says that wrap insurance only comes into play when a claim exceeds Sasria’s R500 million claim limit.
“Considering the current environment, I would strongly advise South African business owners to consider wrap insurance. It should be a priority, given the serious risk that unrest and looting pose at this stage.”
Sasria recently told Parliament that the July riots were among the most expensive in the world in the last decade, even surpassing the damages caused by widespread riots in various US states over the killing of George Floyd last year.
Sasria’s burden
“Considering the financial magnitude of the July riots, South Africa businesses must also consider the real possibility that Sasria might not be able to provide adequate coverage for everyone, so private sector insurers will have to be relied upon to cover the shortfall,” says Folgore.
Last month, Sasria approached government for a capital injection from the treasury to cover any shortfalls in paying out insurance claims. Some R3.9 billion will be disbursed to Sasria to help it meet its obligations until the end of the current financial year. The organisation indicated that it is currently inundated by claims from business owners for damage cause by the looting and destruction.
Folgore points out that riot wrap coverage not only tops up the Sasria cover, but also provides wider coverage such as sabotage, insurrections, rebellion or revolution, mutiny, coup d’états, looting and malicious damage to property.
“Given recent events, the profound risks posed by civil and political unrest should not be under-estimated. Riot wrap insurance should be non-negotiable as part of any insurance policy and risk management programme,” says Folgore.
