What's Happening?

Power struggle



Few things can disrupt a business more quickly than a power outage. From system disruptions and operational delays to diminished workforce, the impact of South African potential grid failure is becoming increasingly clear. Even though South Africa is making gradual progress towards providing an uninterrupted power supply, continued load shedding, power surges, and the potential of grid failure have ingrained themselves into the country’s culture.

Feeling the strain

According to a survey from the World Bank, as of 2021, over 70% of businesses in South Africa have reported operational challenges due to electricity supply shortfalls. Around the time, our power supplier Eskom, indicated that outages were due to a technical issue at the Medupi Power Station in Limpopo, which resulted in about 85% of its clients experiencing load shedding or partial power outages.

From businesses to homes, load shedding and power outages have created a tremendous strain on everyday life. And with power cuts being announced with ever-increasing regularity, it stands to reason that the short-term insurance industry is feeling the strain too.

The industry responds

On a practical level, a power outage can be defined as any interruption of the electric power supplied to an area or a facility. Outages are usually caused by forceful weather events, technical faults, or overloads. Unfortunately, damage caused by power outages is generally not insurable. This is because of the unpredictability and nature of power outages, which can occur without warning.

However, any subsequent damage caused by the power outage can be insured. With certain policies, clients may enjoy cover for damage to personal property and business losses resulting from an outage. However, to qualify for cover, the damage must be a direct result of the power outage. For instance, if a power outage caused a fire and the fire caused water damage to a building, the water damage would be insurable. Moreover, businesses or homeowners may also purchase additional specialised insurance policies tailored to specific causes. The true impact of this becomes clear when observing the larger economic picture. As businesses are slowed or forced to close due to power outages, the economic impact is hard to quantify. In the 2023 Budget Speech, the Minister of Finance stated that “the lack of reliable electricity supply is our biggest economic constraint”.

Given the scale and complexity, insurance companies are now in uncharted waters. With the increasing magnitude and frequency of load shedding and power outages, they must now grapple with how to manage these risks to protect their clients, while also having to balance sustainability.

Coincidentally, the entire insurance sector is rushing to stay ahead of the curve. With the demand for power expected, companies are now developing innovative products and tailoring their services to meet the needs of businesses and individuals affected by power outages. 

Supporting the client

One of the key focus areas for the industry has been business interruption (BI) coverage, which provides companies with financial assistance in the event of increased expenses, and other economic losses associated with power supply shortages. This demand is likely to continue in the coming years as the industry plans for extended outages or other supply shortfalls. By providing cover for these expenses, insurers can help businesses manage the impact of outages, allowing them to remain operational and stay competitive. Reinsurers have come to understand, by experiencing difficult events, that the limitations in business interruption insurance may not always produce desired outcomes and as such, more exclusions to the provision of business interruption cover due to the failure of electricity supply are becoming the norm.

At Momentum Insure, we realised that one of the biggest concerns for policyholders is that when power is turned back on after a power interruption, often it is joined by a surge in electricity which damages sensitive electronic equipment. This is not directly related to load shedding, as it appears in the normal run of business as well. For that reason, optional cover remains intact for power surges, even though it correlates strongly with the higher incidence of load shedding.

In conclusion, the impact of power shortages on short-term insurance in South Africa has been significant. From complete blackouts to costly insurance claims, the short-term insurance space has seen an increase in demand for energy-related insurance policies as individuals and businesses seek to protect themselves against the ongoing instability.


Although the South African government has set ambitious targets for the generation of additional electricity, businesses and individuals need to safeguard themselves to reduce their reliance on the grid and mitigate risks by protecting their appliances, valuables and assets from further disruption.