Run on Numbers: SASRIA - a reflection of SA’s current unstable societal issues expressed in financial terms
The Reinsurance of Material Damage and Losses Amendment Act of 1990 was repealed in December 1998 and replaced with the Conversion of SASRIA Act 134, which intended to provide for the conversion of the South African Special Risks Insurance Association (SASRIA) into a public company, with a share capital, and for connected matters. SASRIA is a public enterprise listed under Schedule 3B of the Public Finance Management Act of 1999.
The company is a non-life insurance company that provides coverage for damage caused by special risks such as politically motivated malicious acts, riots, strikes, terrorism, and public disorders. The origins of the company go back to the Soweto riots in 1976. At the time, the private insurers considered the risk too high and could not accommodate the market with insurance cover. International Re-insurers were also not prepared to offer re-insurance to short-term insurance companies.
- SASRIA is the only non-life insurer that provides affordable, voluntary cover against unique risks such as civil commotion, public disorder, strikes, riots and terrorism to any individual, business, government or corporate entity which has assets in South Africa. Clients must, however, note that the cover will ensure clients’ assets are insured for up to R500 million. There are many private and government buildings that are valued far exceeding this amount. A point in case is the cost to rebuild the parliament building at a cost of R1 billion. Had this building been insured, SASRIA would have covered 50% of the damage. In what is unfathomable, the current government consider it too expensive to insure government-owned buildings. Yet, their own insurance company states that it offers affordable insurance coverage, be it only for causes, as stated above. Currently, the property portfolio includes more than 82,000 buildings and is valued at R141 billion. Acting Public Works director-general Imtiaz Fazel explained that in terms of National Treasury regulations on managing losses and claims, “the state will bear its own damages and accident risks and be responsible for all claims and losses of state property. Incidentally, had a private insurance company insured the building, the risk inspector of such a company would have picked up the shortcomings at the building and alerted public works about these matters. SASRIA’s special risk cover does, however, extend to municipalities for their municipal assets. All businesses are exposed to a variety of risks. The special risk insurance cover from SASRIA also covers all South African tertiary institutions like universities, and colleges (Special and TVET), whether the institution is public or private.
- It is often said that South Africa is not for sissies. SASRIA should be added as a recipient of the Honoris Crux medal every year for exceptional bravery, which is awarded to members of the South African Defence Force for bravery in dangerous circumstances. The table below shows how every risk measure is either high or very high.
- One consistent source of risk originates at tertiary institutions but is not limited to them alone, as many schools have been vandalised and burnt. South Africa has experienced several historical student protests. These protests include the Rhodes and Fees Must Fall and a constant protest about the National Student Financial Aids Scheme (NSFAS). These are risks that no capitalist will want to underwrite. The ongoing taxi violence in the Western Cape is no different. A research paper titled: “Analysing the impact of taxi violence on commuters in South Africa” by Modipa Mmakwena of the Tshwane University of Technology illustrates the complexities of taxi violence. “The taxi wars are still raging even today, and now they have escalated to a point where they are out of control. Bearing in mind that taxi violence affects the livelihood of taxi drivers, owners, commuters, and the entire society as they transport people from one place to another.” Currently, the ongoing taxi violence in the Western Cape is a major source of concern and potential harm to life and property. SASRIA is once again on the receiving end. There are many grey areas relating to the source of damage to property. Some of the larger issues are the damage to Eskom power stations that, on the surface, appears to be related to incidents covered by private insurance companies. However, there have been some commentators who are of the opinion that these incidents are part of a bigger picture that may lie in a general destabilisation of the government to make them weak for a regime change. The truck burning issues are also frowned upon as it is often not accompanied by looting and seems more intended on intimidation and creating fear. It does seem uncomfortably close to terrorism. Sasria is a member of the International Forum for Terrorism Risk (Re)Insurance Pools.
- According to SASRIA’s latest annual report, collected gross written premiums amounted to R2 786 million for the year ending 2021 (2019/20: R2 417 million), and their investment income was R806 million (2019/20: R257 million). The company had Equity R8 358 million (2019/20: R6 958 million) as of 31 March 2021. However, the civil unrest later the same year wiped out all that was built up over the last decade. The company had recorded its best-ever year, with a healthy balance sheet, and although the financial statements reflect a healthy position, the financials were delayed (which must be applauded) for the company to include information on events that took place later in the year. Every company fears the ultimate threat: concern that it may no longer be a going concern in financial terms. This happened to SASRIA. However, the company reports that “Based on the best estimate, our total claims amount to R36 billion. National Treasury transferred R22 billion, which should enable us to totally satisfy our responsibility to policyholders.” This led SASRIA to state; “As we counted the cost, we also applied to the Prudential Authority to continue trading while insolvent. This was approved until 30 June 2022 to allow for the implementation of management actions to restore solvency “We will wait and see but do not be surprised if Treasury has to come up with another billion or two.
- The taxman must be laughing all the way to the bank. Sars received R539 million in Income tax during (2019/20: R268 million). This “unequal partnership” has now ended. Sars will not reimburse SASRIA for the massive loss incurred later in the year and will keep their money, which will go back to the Treasury, where all government entities stand in a queue for money, which will, of course, include SASRIA. What is true, though, is that Sars must not budget any further collections from SASRIA for many years, as their assessed tax loss will prevent them from paying tax for many years to come.
* Kruger is an independent analyst
PERSONAL FINANCE