TIA2023 Task Solutions... maybe it was not that obvious? - Episode 3 - Sasria

We asked the TIA2023 task sponsors to guide us, as to what they were looking for in their tasks. Below is a for Episode 3 from Sasria

Building Resilience: a plausible system/structure to enhance disaster insurance capacity in South Africa

In response to the need for improved capacity to address natural catastrophes and social unrest disasters, The Insurance Apprentice 2023 contestants were tasked to develop a plausible system/structure between the traditional insurance market and SASRIA, the state-owned insurance company.

This task was aimed at bridging the ensuing protection gap, enhancing coverage, and promoting disaster-efficient risk management in South Africa, taking government resources into account.

The question the contestants were desperately trying to answer was - what would a plausible and practical system/structure look like, to address task in question?

What the solution should have looked like

The solution should have established a collaborative framework that leverages the expertise, resources, and risk-sharing capabilities of both the private sector and SASRIA.

The system/structure needed to illustrate, at least, the following constructs:

• Joint risk pooling - A joint risk pooling mechanism, wherein traditional insurers and SASRIA contribute to a common pool of funds. This pool must be dedicated to covering losses arising from natural catastrophes and social unrest disasters. Insurers and Sasria would incorporate a special joint venture, i.e., a joint stock separate structure that operates independently of both players for the independence of the pool.
• Risk assessment and mitigation - The system would have to facilitate collaborative risk assessment and mitigation efforts. Insurers, SASRIA, and relevant government agencies would work together to analyse and understand the risks associated with natural catastrophes and social unrest disasters. This collaboration would enable the development of comprehensive risk mitigation strategies and the implementation of proactive measures to minimise the impact of such events from both ex-ante and ex-post risk perspective.
• Coordinated response and claims management - A coordinated response framework would need to be established to ensure efficient and effective claims management in the event of a disaster. This framework would involve streamlined communication channels, joint decision-making processes, and the utilisation of digital technologies to expedite claims processing. Insurers and SASRIA would utilise their respective claims handling capabilities, as per standards set by the framework, to establish a seamless and timely response, enabling policyholders to recover and rebuild speedily.

Solving the protection gap

The proposed solution needed to effectively address the protection gap by leveraging the strengths of both the private sector and SASRIA.

• Enhanced capacity - The joint risk pooling mechanism would significantly increase the capacity available to cover losses arising from natural catastrophes and social unrest disasters. By combining the resources and expertise of insurers and SASRIA, the pool would provide broader coverage and higher limits, ensuring that policyholders are adequately protected.
• Balanced risk sharing - Under the proposed structure, risk sharing would have to be achieved through a mechanism such as proportional/joint stock ownership between insurers, the state and SASRIA. Insurers would transfer the portion of their risk that falls within the described contingencies to the joint pool, reducing their exposure and ensuring their financial stability. SASRIA, as a state-owned entity, assumes a substantial portion of the risk, thus providing stability and continuity of insurance coverage for policyholders, with the state providing risk financing and risk layering.
• Premium contributions - Premium contributions to the joint risk pool would be determined based on their exposure to the covered risks. To ease the burden of affordability, the state would subsidise premiums to ensure that there is adequate coverage for all participants, while creating a significant pool of funds to support claims payments and risk management activities.
• Regulatory framework - The government would provide a robust regulatory framework that governs the establishment and operation of the joint risk pool. This framework would outline the roles and responsibilities of the involved parties and establish guidelines within which competition matters are observed. 

Muzi Dladla
Executive Manager: Stakeholder Management
SASRIA SOC Limited