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Cover for riots, protests and violent strikes essential for businesses and individuals



It is crucial for risk managers, business leaders and consumers to review their insurance programmes and ensure that they have cover provided by the South African Special Risk Insurance Association (SASRIA) against the risk of loss or damage caused by protests, riots, strikes, civil commotion and public disorder.

Since the beginning of 2010 to June 2018, South Africa experienced 1330 violent service delivery protests spurred by service delivery failures, corruption and growing youth unemployment – and virtually all exacerbated by criminal elements.

Commercial and personal insurance policies specifically exclude any loss or damage to assets as a result of these types of events as insurers are precluded from underwriting these risks.

Cover is only available through SASRIA and provides short-term insurance cover for riots, strikes, terrorism, civil commotion and public disorder to businesses and individuals. SASRIA insurance is available for material damage, business interruption, money, goods in transit, motor and construction risks.

According to SASRIA’s 2018 Integrated report, in the financial year ended 31 March 2018, they paid net insurance claims of R663 million, up 15,5% on the previous year with a marked increase in claims severity. The biggest claims drivers remain the high number of strikes and protests relating to service delivery and, post year-end in places like Mahikeng, as a sign of political disenchantment. Service delivery protests have become the number one tool for disgruntled communities to raise their concerns with municipalities and government officials.

Implications for Individuals and businesses

According to Victor Shonhiwa, Business Unit Manager – Global Client Network at Aon South Africa, consumers and local businesses could find themselves severely out of pocket if their assets such as properties and vehicles are damaged during a violent protest. “In most cases, property and vehicles are bank-financed.  If the property, vehicle and any cargo / stock is burnt or damaged during a strike or protest action and you don’t have SASRIA cover, you will still be liable for your bank loan repayments in addition to the cost of the damages.  Given the status quo, it’s a non-negotiable cover on any insurance policy, available at very reasonable premium,” says Victor.

What about Business Interruption?

For commercial clients, SASRIA cover in terms of Business Interruption is limited to fixed expenses or standing charges and net profit, but not for the traditional contingent business interruption covers such as losses following damage to premises of customers and suppliers, and to the supply of public utilities like water and electricity. These covers can be purchased from the insurance market to ensure that your business is comprehensively covered.

Implications for multinationals with local SA operations

SASRIA coverage limits are set at R500 million on all classes of business at set rates however cover of up to R1billion is available on application. For large corporates and multinational organisations with global insurance programmes, these limits may however be insufficient and may require additional cover in the form of a ‘riot wrap’ policy.

The riot wrap cover also provides cover for exclusions of war, civil war and terrorism which are not covered under SASRIA. Essentially, where combined material damages and business interruption values exceed SASRIA’s R500million limit, the riot wrap policy will provide extended coverage in respect of the claim once the underlying SASRIA (or primary limit) is eroded.

However, the structuring of such an insurance programme needs specialist experience of the relevant tax and insurance regulatory regimes of the country. “When it comes to cross-border insurance on a global programme, the considerations must include whether a local jurisdiction, like South Africa permits non-admitted insurance from an unlicensed global provider to cover local riot risks,” explains Victor.

“If the additional riot wrap insurance is placed outside of SA’s borders as part of a global insurance programme, multinational companies may be exposed to regulatory and tax scrutiny when it comes to claims time if an incident occurs at its local SA operation.”

“If the claim is paid outside of the country to the global parent operation, there could be onerous tax and compliance burdens on a multimillion claim settlement when trying to transfer that money to the SA operation. In the interim, the local operation will be unable to operate in the absence of the financial relief to resume operations. Risk managers are well advised to work with a professional and global brokerage who can assist them to formulate their risk strategy for local risks within a global insurance programme, like SASRIA to ensure that they don’t fall foul of local regulatory compliance and tax laws,” advises Victor.

Thusang Mahlangu, CEO of Allianz Global Corporate & Specialty (AGCS) emphasises this view: “It is critical for risk managers of multinational organisations to understand the local laws and regulations of the country when it comes to managing risk.  They carry a significant responsibility to safeguard the business operations across multiple jurisdictions and falling foul of any compliance or local regulations could incur significant penalties and fines, notwithstanding reputational damage.  It’s here where the tripartite alliance between the risk manager, insurer and broker become pivotal in ensuring that there are no gaps or inconsistencies in insurance coverage, and where having risk partners with global presence and local market expertise becomes crucial. 

“On managing multinational programmes, we look at a ‘four C’s approach’ – managing costs, control and compliance, and ensuring coverage is correctly scoped and consistent across all operations,” adds Thusang. 

Status Quo demands attention on SASRIA exposures

Given the status quo of the last few years, cover for damages cause by riots, violent strikes and protest action is a non-negotiable cover on any insurance policy and risk management programme.  It’s essential to consult with your risk advisors to ascertain whether the insurance coverage has been extended to cover SASRIA perils.