Tidal waves wreak havoc on Durbans beachfront

The value of coastal property in South Africa continues to surge. M & F chairman Bruce Campbell believes that insurers and underwriters are sitting on a time-bomb where providing risk cover to these properties is concerned. Does the local short-term insu

Billed as 'the mother of all storms' a series of tidal waves battered the Durban beachfront earlier this week. The storm reached its peak early Monday morning, with a number of giant waves causing damage to businesses on Lower Marine Parade and to holiday homes along the beachfront at The Bluff and Ballito.

Beaches and ports in the city were closed on Monday after a South African National Weather Service warning of possible seven metre high swells along the southern Kwazulu-Natal coastline. The first waves hit the shoreline at around 3am on Monday morning. Throngs of people swarmed to viewpoints along the coastline to watch the spectacle unfold during the course of the day.

As early as Tuesday, the seven to eight metres swells had subsided to more manageable two and three metres swells. Durban harbour was re-opened and preparing to handle the backlog of 31 ships waiting to gain access to the harbour after its day-long closure.

The billion rand question

As with all natural disasters, the immediate debate was over the cost to human life and property. Initial reports are of one person losing their life in the storm. A helper at the Shelley Beach Ski Boat Club was found washed up on the beach on Tuesday.

Estimates as to the amount of damage caused by the heavy waves were widely divergent. Initial estimates of some R500 million were touted, before television news reports on Thursday evening put the damage at nearer R1 billion. The KwaZulu-Natal government estimates R500 million to repair damage to roads, beaches and infrastructure alone. It will no doubt be some time before the exact scale of the loss can be accurately ascertained.

Meanwhile the clean-up operation on Durban's beaches is already underway. Durban officials dont see any major threat to tourism to the region over the coming Easter holidays. It appears that some beaches in the Ballito area will not be rehabilitated in time for the high season - but major planned activities such as the Vodacom Easter Adrenaline Festive and the Easter Ski Boat Festival will go ahead as planned.

Short-term insurance's own Nostradamus

We recently attended Mutual and Federal's 2006 results presentation in Johannesburg. During his presentation, M & F managing director, Bruce Campbell, warned that he believed we would see more weather catastrophes in 2007. Not yet three months in to the year and his predictions have proved correct.

Campbell also expressed concerns about the huge insurance risk posed by high property value and property density along the country's popular coastal regions. He suggested that the underwriting firms providing cover for catastrophes in these areas were perhaps over-exposed given recent increases in property value and development.

This tendency is borne out when considering the values insured on individual short-term policy holders. Initial reports are that claims submitted after the latest natural disaster in Durban could be proportionally reduced due to inadequate policy cover. It seems many of the holiday home owners affected by the storm have insured their homes at purchase values, and have not updated policies to reflect current values.

This could lead to many claims being refused, or paid out at proportionally lower rates.

Editor's thoughts:
The value of coastal property in South Africa continues to surge (see Stokes' Stage, 23/03/2007). M & F chairman Bruce Campbell believes that insurers and underwriters are sitting on a time-bomb where providing risk cover to these properties is concerned. Does the local short-term insurance industry have an accurate handle on the risk it is covering? Send your comments to gareth@fanews.co.za.