South African insurance companies are fed up with BAD weather
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With vicious winter storms lashing the country, South African insurance companies are rethinking their policies on natural disasters …
It’s not the first time South African insurance companies have changed their tune. Following repeated years of load-shedding, many changed their policies on surge-damaged household items. Now, it appears, they’re getting fed up with all the bad weather plaguing the country, reports Daily Investor.
Several vicious winter storms have brought snow, hail, rain and wind to most of the country this week, leaving a trail of destruction in their wake. Roofs separated from buildings, widespread flooding in low-level areas, homes and cars damaged by fallen trees – the risk for South African insurance companies is into the stratosphere.
SOUTH AFRICAN INSURANCE COMPANIES
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As a result, you’re at risk of no longer being covered by South African insurance companies against particular risks. Most notably extreme weather events, of which Mzansi has endured several in the preceding years. According to the Prudential Authority regulator of the South African Reserve Bank (SARB), there is a massive gap forming between insurance need and actual cover.
This phenomenon is known as the ‘insurance gap’. And this occurs due to high costs encountered by South African insurance companies when there is an uptick in claims. The most common response to this is to increase insurance premiums while reducing coverage. Therefore, a big risk noted is the rise in extreme weather events. As a result, the SARB will conduct a series of meetings with South African insurance companies to assess their risk readiness.
DEBATING EXTREME WEATHER COVERAGE
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Damage to property and infrastructure because of violent storms – which may be attributable to broader climate change – has brought on extra risk and cost to the national fiscus. Therefore, insurers are debating their level of coverage. A Prudential Authority report had the following to say. “Insurance markets are hardening, leading to more natural catastrophe cover restrictions. The restrictions mean certain perils will be uninsured.”
Moreover, a lack of industry guidance and standardised methodologies makes it difficult to assess the financial impact of climate change and extreme weather. Therefore, the regulator wants to form a Task Force on Climate Financial Disclosures (TFCFD) to increase its quantity of reliable data. Similarly, government is facing an increased debt burden, placing additional pressure on the fiscus, if the ‘insurance gap’ is not negated.
ARE YOU COVERED FOR NATURAL DISASTERS?
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