SA's Special Risk State-Owned Insurer Will No Longer Cover Damage from Riots and Protests in Event of Grid Failure
Key Highlights :
The South African Special Risks Insurance Association (Sasria) has announced that it will no longer provide cover for damage to property caused during riots and protests that could break out in the event the country's electricity grid collapses. This move follows similar decisions by South Africa's big short-term insurers who have either pulled or plan to remove grid failure cover from their policies this year.
The exclusion applies to “any riot, strike or public disorder (including civil commotion, labour disturbances or lock-outs)” that are directly or indirectly caused by the grid failure. It will also not cover problems arising from disruptions to water supply, telecoms systems or sewerage, and losses from rotting food. This decision comes in the wake of the July 2021 unrest that left over 350 dead, nearly 2 million people unemployed and more than R50 billion "wiped off our economy" in what President Cyril Ramaphosa called the moment South Africa stared into the "heart of darkness".
South Africa has experienced unprecedented levels of load shedding over the past year and a half, hitting Stage 6 numerous times, with analysts anticipating higher levels as winter rolls in. Nedbank chief economist Nicky Weimar said in April that they had been running scenarios of total grid failure, and she believed that it is more than likely a reality. If the grid collapsed, it would take Eskom, in a best-case scenario, around a week to restore power. However, it is anticipated that it will most likely take several weeks if it happened.
The potential consequences of a grid failure are far-reaching and could include disruptions to supply chains, transport, banking, fuel supply, food security, and personal and business security. Protests and riots are also anticipated. Netcare said in March that it will offer some of its staff and families shelter, in the "unlikely, but not impossible" event on a collapse. Mining companies have also been drawing up contingency plans.
Sasria secured a cash injection of R22 billion from the government in the wake of the July 2021 unrest, but was still projected to suffer a loss of about R26 billion that financial year. The reinsurance market has urged Sasria to "eliminate our coverage for claims stemming from electricity grid failure", leading to the current exclusion.
It is clear that South Africa must take the necessary steps to protect itself from the potential damage caused by a grid failure. The exclusion of cover from Sasria is an important step in the right direction, but more must be done to ensure that the country is prepared for the worst-case scenario. Businesses and individuals must also take steps to protect their property and assets in the event of a grid failure.
