19 Mar Be alert to the additional risks of election season
Apio director Richard Hood speaks about the risks of political instability during the upcoming election season, and how to mitigate against those risks with the right planning and cover.
Every year, famed international insurer Lloyds of London publishes a list of the key risks in territories around the world. In South Africa, it lists civil conflict as the No. 1 risk in 2018 for the country. It therefore makes sense for companies to mitigate against the risks associated with civil and political risk, particularly as we enter a period of potential political instability during the election period.
The state-owned insurer Sasria recently released an article that stated that in the previous nine months, they had paid more than R1 billion in claims due to service delivery protests. This is a shockingly high figure. Sasria is a government-owned insurer that provides special risk cover for political risks – war, terrorism and any damage sustained through political causes, riots or protests. None of these eventualities are covered by a conventional insurance policy.
While most companies insure their assets – buildings, contracts and motor vehicles – very few purchase the special risk cover available for business interruption. However, it is important to cover both the asset risks and additionally, the consequential loss to protect your business during times of heightened risk.
It can be an expensive item, but you don’t necessarily need to buy Sasria business interruption cover for the entire year. You can identify times of the year where you believe there’s a heightened risk to your business – for example, during an election period, or a wage negotiation period – and effect the cover only during that particular period of time. It’s possible to be quite selective and identify only the times where heightened risks are apparent.
A risk that is not always adequately identified by clients is for goods in transit. Recently, service delivery protests have taken place on national roads, for example in Mooi River on the N3 in KZN, where trucks have been burned and loads lost. It’s worth bearing those risks in mind and ensuring that you have the appropriate cover from Sasria for road risks. For smaller companies who employ the services of courier or transportation companies, it’s important to engage with those companies to confirm that the transporters in turn have adequate cover in place, both from a conventional insurance point of view as well as a Sasria perspective.
Another added benefit offered by Sasria is Security Cost cover. This is a new enhancement to Sasria cover which provides cover for pro-active security costs in the event there is an imminent threat to your business. When you’re confronted with violent protests, labour disturbances or other threats to your company assets, you can bring in additional private security to protect your property, and Sasria will bear those costs. It’s relatively inexpensive and again, this cover can be effected for short periods of heightened risk. All South African businesses should have security cost cover to manage asset risk.
Sasria provides extensive cover of up to R500 million, which can be extended to a further R1 billion for corporate risks. While the business disruption cover is more costly, the asset insurance is relatively inexpensive.
You should have a discussion with your broker or advisor on an annual basis to evaluate the political risks your business faces in these turbulent times, to ensure that you have adequate cover. This can be arranged around certain times of the year during heightened risk and can be structured in terms of the different risks you believe you’re exposed to. A detailed discussion – especially entering the election period – should be part of an ongoing discussion with your broker.