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Flood ravaged KZN insurance claims to exceed R1bn – Saia

Insurance firms say it is too early to give a precise estimate of the flood damage in KwaZulu-Natal, but that it will be significant. Picture: Doctor Ngcobo, ANA.

Insurance firms say it is too early to give a precise estimate of the flood damage in KwaZulu-Natal, but that it will be significant. Picture: Doctor Ngcobo, ANA.

Published Apr 19, 2022

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South African Insurance Association (Saia) on Friday estimated the damage in KwaZulu-Natal (KZN), which had been declared a State of Disaster after heavy rain and floods left a trail of destruction in the province, will be higher than R1.1 billion.

“The damage to infrastructure in KZN after the 2019 flash floods was estimated at R1.1 billion yet estimates for this this one already exceeds that,” it said in a statement, adding the devastation and loss of lives following the recent floods marked the worst natural disaster ever experienced in South Africa.

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This infrastructure damage comes less than 10 months after KZN and Gauteng, South Africa’s busiest economic hubs, experienced more than R50 billion economic fallout after businesses were looted and damaged during the riots in July 2021.

Following heavy rainfall and extensive flooding in KZN on April 11 and 12, more than 300 people have been confirmed dead, with the figure set to rise as rescue workers continue to comb through the debris.

An estimated 140 schools have been affected, electrical substations submerged, power lines severed, and roads and bridges have been destroyed.

Businesses including Sappi, Toyota, Hulamin, Grindrod Fortress Reit say they have been affected, while Transnet’s port operations, as well as Eskom and telecoms operators such as MTN and Vodacom, have felt the impact.

Old Mutual Insure said on Friday its initial assessments suggested damage was significant and “could run into hundreds of millions of rands, if not more”.

Spokesperson for Old Mutual Insure, Lizo Mnguni, said the company had received a staggering volume of claims since Tuesday when the damage took hold.

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“The claims continue to come in fast given the large area affected. We expect this to last in the coming days. We have mobilised our teams to deal with the expected volumes to ensure continuity of customer service in these difficult times,” Mnguni said.

He says the company had seen a significant increase in weather-related losses in recent times, and was expecting changing weather patterns and climate change to continue to cause havoc.

“Our pricing for products and premiums already incorporates a component to cater for weather-related risks.”

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He said Old Mutual Insure was working closely with reinsurers to understand the global risk environment and impacts on South Africa.

“There is no indication that coverage for natural catastrophe risks will be withdrawn. We have seen that globally premium increases are common following major catastrophic weather-related events, which the industry has already seen following the major European floods in 2021,” he said.

Ricardo Coetzee, the head of Auto & General Insurance, said while it was too soon to assess the overall impact as claims are still being submitted, it was significant.

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“For those who have suffered damage to their property and possessions as a result of storms and floods, it’s essential to contact your insurance provider as soon as possible. To minimise further damage and injury, extra vigilance on the roads and at home is imperative,” he said.

Saia and its members say they have been concerned about the potential impact of climate change for many years and have been engaging with various relevant stakeholders on issues about risks of climate change.

Saia also recommended that for insurance purposes should an insurance member’s home be surrounded by floods, if it was safe to do so, photograph the damage to your property for insurance purposes. It also recommended the insured examined their policies to see what was covered.

Insurance takes many forms such as homeowner/building cover, household contents cover, landslip and subsidence cover, as well as all-risk cover.

Andrew Bahlmann, the chief executive of corporate advisory firm Deal Leaders International, said earlier this week that flooding in KwaZulu-Natal would have long-term financial impact on businesses that were just recovering from the July unrest, and leave a longer-term socio-economic impact pertaining to climate change.

Bahlmann said the business disruption was rubbing salt into a very open wound following last year’s unrest that left a R50 billion economic damage.

He said that in the short term, business performance was being impacted severely due to the geographic concentration risk.

“This is highlighted by KZN’s pivotal role in South Africa’s supply chain and logistics, with the closure of container terminals at the Port of Durban illustrating just how unusually severe this crisis is, with the impact spreading far wider than KZN,” he said.

Climate change was increasing the insurance and recovery costs following more frequent and severe floods, as well as other disasters such as fires.

“It begs the question of whether people should be set up for ruin by simply allowing them to build back in areas which in the future are going to be affected time and again. It is fair to say that taxpayers carry a huge burden of paying for rescue and relief costs," Bahlmann said.

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