Insurers badly shaken
The hailstorms that tore through areas of Gauteng mid-November 2023 illustrate both the power of nature and how powerless humankind is to withstand its might. Over a few brief minutes, the heavens opened to dump tonnes of marble-sized ice pellets on businesses, homes and vehicles, causing untold damage to assets, whether insured or not. As is often the case, the social media channels were soon flooded with an array of photos and videos of the storm and the damage it caused.
Too early to guess the damage caused
Immediately following the “adverse weather event” Santam, South Africa’s largest short-term insurer confirmed that it had received reports of damage to policyholders’ insured goods in areas including the Johannesburg CBD, Midrand, Sandton and parts of Soweto. “Because of the nature of the insurance claims process, it is too early to quantify the extent of the damage or how much claims could possibly amount to,” said Fanus Coetzee, Santam’s Executive Head of Claims, in the insurer’s immediate press release re the event. He did, however, concede that the frequency and severity of extreme weather events was on the rise, urging policyholders in affected areas to take precautions where possible.
In his quest to find a similar hail loss event and extrapolate the historic damages to present day, this writer stumbled upon an interesting article published by global broker Willis Towers Watson (WTW) under the title: ‘A new view of South African hail risk for the insurance and reinsurance industry’. In that piece, the broker noted that hail-related losses “were relatively frequent in South Africa, [accounting for] seven of the top 10 insured natural catastrophe events since the 1970s”. The article, which was penned in March 2021, further postulated that “upwards of 45% of the total value of insured motor and property claims from natural perils over that period were caused by hail damage”.
How hailstorms ‘shocked’ local insurers in 2012, 2013
The major loss event mentioned in the WTW article occurred in November 2013 in Pretoria. A quick ‘scan’ of Santam’s Annual Financial Statements 2013 confirmed “two significant hailstorms in Gauteng during November 2013, [with] the second event being one of the most severe catastrophe events experienced in South Africa to date, with total claims for the industry estimated to exceed R1.6 billion”. Another multination broker, Aon, said that the 2013 storms occurred just 12-months after two similar storms ‘rocked’ Gauteng in October and November 2012. The 2012 storms resulted in an estimated 25 000 insurance claims and was also pencilled in as a R1 billion-or-worse loss event.
When approached by the media to give an early estimate of the insured losses due to the latest hailstorm, the major short-term insurers said it was too early to say. The likes of Hollard and OUTsurance said they had seen a sharp spike in claims volumes, but that they had adequate capacity to handle same. And Santam confirmed it had activated its catastrophe claims management protocols. “Our first step on the hail damaged vehicles, for example, is to conduct triage on all the incoming hail damage claims to ensure that we prioritise repairs on vehicles rendered non-drivable and non-roadworthy due to damaged windscreens and lamps,” Coetzee said.
Given some of the Facebook photos seen by this writer, the number of ‘undrivable’ vehicles could run into the hundreds, with many images of cars with both front and rear windscreens shattered. PS, the word is that Santam had received more than 1 500 claims, and its direct insurer MiWay around 1 000 claims in the week-or-so following the hailstorm. And although he reiterated that it was too early to comment on total losses, when pressed, Coetzee conceded that the rate of claims received to date “seemed far less” than the 2013 experience. If FAnews had to take a stab at the industry wide insured losses post this event, we might go with 10-12 000 claims totalling around R150-R200 million; but time will tell.
The dilemma that South Africa’s non-life insurance brokers now face is how to limit clients’ exposures to this type of loss event. It is, after all, impractical to suggest to all commercial and private lines insureds that they bunker down in their homes until the rainy season is over. Some practical advice may include avoiding taking to the roads if the weather looks ominous, and signing up for any weather warnings that your broker or insurer may send out. Santam, meanwhile, suggests undercover parking at malls and petrol stations as “good temporary solutions to protecting your car during a severe downpour”.
Common-sense ways to protect your assets
On a more practical note, the insurer suggested parking your vehicle inside your garage or under a carport whenever possible, and keeping a large fleecy blanket in your boot, which you can use to cover your car in emergencies, hopefully minimising the impact of hail strikes. Of course, the latter advice is accompanied by a couple of SA-specific caveats: first, do not stop to cover your vehicle unless it is safe to do so; and second, do not exit your vehicle if the hail is too severe, as large hailstones can cause serious physical harm. If you are driving during a severe storm, the advice is to limit your speed in line with the driving conditions, and ensure that your vehicle’s lights are on.
This writer wondered how long it would be before the country’s large insurers started looking into the “parked in a garage overnight” information that many insureds give when buying cover. Nowadays, many insureds use their garages for storage, and leave their cars on their driveways overnight, especially in secure estates. Finally, insurers offer a range of common-sense maintenance-focused advice that your clients can apply to protect their business premises and homes during severe weather. First and foremost, your clients must make sure that any stormwater run-off is directed away from their buildings. They should also ensure that stormwater drains are functioning, and that gutters on their homes are in a good state of repair and free of debris.
With the frequency and severity of extreme weather events on the rise, your clients can anticipate further inflation-plus increase in their car and home insurance covers in coming year. Reinsurers, meanwhile, are doing their part to assist insurers in underwriting this peril by modelling hail risk. Case in point, Willis Re has developed a South Africa Hail Model for Property and Motor Classes. This model is in part informed by extensive stochastic simulation methodologies completed by German-based Karlsruhe Institute of Technology (KIT), which undertook to “simulate the full range of plausible hail events, represented by modelling the characteristics of historical event distributions”.
Stochastic simulation what now…
In the aforementioned article Geoffrey Saville, then Head of Weather and Climate Risks Research at WTW, noted that “Willis Re found its new [March 2021] view of South African hail risk to align encouragingly with key claims benchmarks” and that an “analysis of 56 ‘major’ claims events between 2004 and 2019 showed promising corroboration with the view of risk at short return periods”. Sound too technical for this newsletter? Agreed! Please consider this discussion ‘parked’ under a fleecy blanket for another day.
Writer’s thoughts:
Given the sharp rise in frequency and severity of weather catastrophes, it is just a matter of time before you suffer a loss. Were you or any of your clients caught up in the 13 November hailstorms? If yes, are you happy with the post-loss response from your broker and / or insurer? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts [email protected].
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