Having celebrated 35 years of protecting the country’s assets in 2014, Sasria’s core business is the provision of short-term insurance for riots, strikes, terrorism, civil commotion and public disorder to a range of corporate and individual policyholders. Its customer based is made up of all sectors of the economy and includes listed companies, public companies and small SMEs, though to state-owned companies and private individuals.
The South African Special Risk Insurance Association’s (Sasria’s) formation in 1979 came as a direct result of a reluctance on the part of the South African short-term insurance industry to provide insurance cover specifically for political risks. It was in fact this very reluctance which provided an opening in the short-term insurance market, in turnprompting the South African government to approach the South African Insurance Association (SAIA) regarding the feasibility of establishing a separate institution to provide insurance cover for these incidents. Sasria was then formed as a Section 21 company, the then South African Special Risk Insurance Association (SASRIA), to provide insurance for politically motivated acts, political riots and terrorism. The cover that Sasria provided was subsequently extended in 1998 to include such non-political occurrences as strikes and labour disturbances.
Sasria is today wholly owned by the state, a short-term insurance company which reports to the National Treasury. As it is a state-owned company, Sasria’s specific strategic mandate sets out its principal objectives, namely to provide special perils cover for damage caused both by events listed in the Reinsurance of Damage and Losses Act 56 of 1989 and any others deemed necessary by Sasria, and to research and investigate potential future coverage for any special peril of national interest. The nature of the mandate allows Sasria to provide cover differing somewhat from the norm, and include any act directed to overthrow the a local, provincial, national or tribal authority government through fear, violence or terrorism, as well as the bringing about of damage in order to achieve political, social or economic change, or as a form of protest against any Government or, simply, for the purpose of inspiring fear in the public. Sasria is also equipped to cover for any form of riot, strike or public disorder, any attempt to perform any of these acts, and the action taken by a authorities to control or prevent these from occurring.
Sasria is the only insurer in South Africa qualified to provide such cover for the damage caused during these kinds of incidents. Service delivery protests and violent strikes are certainly two things of which one unfortunately must be mindful in this day and age, and Head of Dialdirect Insurance, Warwick Scott-Rodger, explains why Sasria’s policies are so important when it comes to covering damage caused by these actions. “Because of the unpredictable and often chaotic nature of these incidents, both private and public property can suffer expensive damage. It is for this reason that we encourage people to ensure that Sasria cover is included on their insurance policies so that they are covered should the matter affect them personally. If they’re not properly covered, their insurance company might reject claims for damage or loss incurred during a strike, civil unrest or protest.”This unpredictability is exactly why individuals must verify with their insurance companies that Sasria cover is, in fact, included on their premiums, with the cover applicable to personal property such as vehicles, homes and household contents, as well as commercial and government property.
With such an holistic range of special insurance offerings, the present time is a particularly valid period for a company as astute in its operations as Sasria, with strike-related damages at an all-time high as recently as October 2013. It was a year which saw Sasria record the largest insurance claim ever to hit its books – a R70-million claim for a warehouse that was damaged during the farmworker strikes in the Western Cape – along with a spike in both the severity and frequency of claims due largely to protracted labour action. Sasria’s managing director, Cedric Masondo,spoke at the time of what had been a steady increase in claims since 2010 related to service delivery protests and strikes, although the majority of these—about 80% —were due to labour action. “The employees are angry,” he said. “It is still too early to say this is a trend but we are worried at the increases.”
Other large claims received came from strikes that took place at the Medupi power station construction site, amounting to around R10-million in total. Increases in claims also came from the mining sector, an industry which historically has seen a high number of strikes, but over the period they occurred in increasingly disorganised and protracted manners, with Masondo also remarking on a noticeable increase in the number of unprotected strikes. Also concerning was his noting that during the year, strikes extended beyond the usual “strike season”of April to September, with the company receiving claims well into November and even as late as January. The severity of claims increased both because of inflation and also because of the size of the claims themselves. “The nature of our business is that the risks are unpredictable and have big impacts,” Masondo said, with all of these events serving to prove that Sasria has an important role to play in ensuring futures throughout the country.
With the recognition that it operates not in isolation, but firmly as part of a community, Sasria’s duty to promote opportunities geared toward social and economic development in the community in which it operates is at the heart of the business. At the core of Sasria’s sustainability is its commitment to contributing 1% of its after tax profit to Socially Responsible projects, an undertaking which has been in place for the past eight years, and which was upped in the 2010 financial year to 2%. Alongside this, Sasria actively seeks to strengthen not only the insurance industry, but the financial sector and the country as a whole, through its CSI initiatives. Central to these initiatives is Sasria’s wish to contribute to the national development of skills, and subsequently address the skillsshortage in the country, as identified by the government. To this end, Sasria established an actuarial development program in 2003, The South African Actuaries Development Program (SAADP). Theprogram aims to unearth and harness potentially unrecognised mathematical and analytical skills of black students, to help them pursue career opportunities in the field of Actuarial Science. To date Sasria has seen 109 students graduate,13 of which have qualified as actuaries, with all graduates in full time employment within the financial sector.
As a company Sasria is completely self-funding, meaning that its incomeis generated entirely from itspremiums, and it is this money which is then used to pay out in the case of any claims or expenses. Additionally, the company is responsible for ensuring thatadequate capitalis available to cover major catastrophic losses should they occur, meaning that the country is in safe hands even if the unimaginable should strike. The cover that Sasria provides can be obtained through a vast network of authorised non-mandated intermediaries, or NMI, or alternatively via underlying insurers, as Sasria does not do business directly with its customers itself. As such, the NMI handles the day-to-day administration of the business and acts as a vehicle to collect premiums on Sasria’s behalf, meaning that Sasria’s customer base is closely linked to that of its distribution channel. It is a business model that has enabled Sasria to continue operating at relatively low costs, in turn ensuring that the cover it offers can be done soat affordable premiums.
This business model has been largely responsible for the organisation’s success over the past 35 years, and has paved the way toward notable profit increases last year in spite of a five-month work stoppage in the platinum sector. The number of claims for the 2014 financial year decreased by 32% from the 2013 figure, down to 1,525 from 2,233 in the previous year, while Sasria also managed to increase its earnings, with net profit before tax increasing from R482-million to R944-million. While several claims relating to the platinum strike were filed, most of these dealt with looting rather than the destruction of property. “Despite the platinum strike being so long, it wasn’t as bad as we anticipated,”said Cedric Masondo.“There was a lot of media hype around the strike but it wasn’t too violent.”Sasria’s recent success can be attributed rather equally, explains Masondo, to a combination of the labour environment and significant marketing efforts. “When large strikes happen, it creates that awareness. Companies start questioning whether they are adequately covered, and it was our marketing efforts supported that awareness.”It is Sasria’s innovation and relevance which will allow it to continue to build a sustainable, vibrant business which has the interests of the country at heart.