Santam and Old Mutual wading through over 7 000 KZN flood claims

Short-term insurers tally up the cost of what one major player describes as ‘by far the largest natural catastrophe’ in its history.
Part of a road in Claremont, west of Durban, that was severely damaged in April. Image: Kopano Tlape/GCIS

Short-term insurers are only now starting to add up the damages caused by floods that hit KwaZulu-Natal during April, and that of the second bout of heavy rains that fell during May. Two of the larger insurers, Santam and Old Mutual Insure, have indicated that they received thousands of claims.

Santam told Moneyweb two weeks ago that it had received around 5 000 claims, while other insurers were still adding up their numbers.

Fanus Coetzee, head of claims services at Santam, said it had approximately 5 000 claims registered then. “We are unable to put a value to the claims as it is still very difficult to quantify at this point.

“Many properties still remain inaccessible due to safety concerns as a result of extensive structural damage, while other properties are filled with mud and debris,” said Coetzee.

On Wednesday, Santam was in a position to supply more accurate numbers in an update to stakeholders, while Old Mutual Insure gave an indication of the claims it received on Tuesday.

Multiple billions

In total, claims against just these two insurers could exceed R5 billion by the time they have all been registered and the damages assessed. Other short-term insurers are yet to supply figures.

On Tuesday, Santam warned shareholders in a statement and in an online presentation that the extent of the damages and insurance exposures is still being assessed.

“The current best estimate of Santam’s gross exposure to the KwaZulu-Natal floods is around R3.2 billion,” said Santam CEO Lize Lambrechts.

“Santam’s reinsurance programme provides protection against such natural disasters. The net losses to Sanlam will be approximately R500 million, including the premiums to reinstate the reinsurance cover.”

Santam noted that based on its internal modelling, the floods can be categorised as a one in 25-year event.

“It was by far the largest natural catastrophe in Santam’s history. Santam provided support to its clients during this trying time and deployed claims team in KwaZulu-Natal immediately after the event,” said Lambrechts.

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‘Disproportional impact’

Santam noted in its statement published on the JSE Sens service that its Conventional Insurance business reported a negative net underwriting margin during the four months to end April, but added that a “significant catastrophe event like the KZN floods” would always have a disproportional impact on the underwriting results during a short reporting period of only four months.

Other than the impact of the floods, conventional insurance achieved strong gross written premium growth of 7% in a challenging economic environment, noted management. But the underwriting results were significantly impacted by adverse weather conditions in the first three months and the devastating floods.

Santam’s division for commercial and personal intermediated business also suffered due to the floods. It reported that growth in gross written premiums improved compared to 2021, but underwriting results were also negatively impacted by the April floods, other weather-related claims, and a number of fires that gave rise to large claims.

The MiWay business was also affected by the floods, while agricultural-related claims also increased due to flood damage to crops and infrastructure.

Business interruption claims

Santam’s update included information on other issues.

Lambrechts noted that, generally, claim trends have normalised after nearly two years during which insurance companies experienced an unique situation. One important change was that vehicle accidents and claims related to accidents increased back to “normal” levels compared to a period of low claims during Covid-19 lockdowns. People didn’t use their cars much, and didn’t crash into each other.

Santam said it has made good progress in finalising the remaining contingent business interruption (CBI) claims relating to the Covid-19 lockdowns and reinsurance recoveries. It reiterated previous announcements that no adjustments have been necessary to the earlier provisions totalling billions of rand.

Old Mutual Insure

Old Mutual Insure said in its statement that it remains committed to supporting customers affected by the devastating floods in KwaZulu-Natal in April, and in helping them to speedily restore their affected assets.

“To date, we have received over 2,200 claims related to this catastrophe. There are several reinsurance agreements in place which are expected to reduce our portion of the gross claims with an estimated net impact of between R100 million and R150 million,” says Old Mutual.

However, Old Mutual Insure warned stakeholders that it is currently reviewing the pattern of claims and the impact of the recent second wave of floods in KZN in May, indicating that management expects that total claims may still increase. It said further updates will be provided when necessary.

Extended impact

It is important to note that the damage to houses, cars and personal belongings is but the tip of the iceberg.

The expensive damage to roads and infrastructure – also covered by insurance – has a knock-on effect on economic activity and the true cost of the disaster is way more that the damage to material things.

It will take KZN years to recover from the triple calamity of Covid-19 in 2020, social unrest in 2021 and floods in 2022. Employment figures and GDP data will show the true extent of the damage.

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