Liabilities resulting from protest action and civil unrest in South Africa are generally excluded under regular insurance policies, predominantly as a result of the historic prevalence of these events. However, these perils are covered by the South African Special Risks Insurance Association (SASRIA), which offers cover as an extension on most traditional insurance policies.
What is SASRIA cover and what does it indemnify against?
SASRIA is a state-owned, short-term non-life insurer which was formed in 1979 after the events of the Soweto uprisings in apartheid South Africa. It provides specific, special risk cover to individuals, businesses and government entities that own assets within the borders of South Africa. This unique cover insures against risks such as civil unrest and commotion, public disorder, strikes, riots (politically and non-politically motivated) and terrorism. Generally speaking, most insurance companies will not underwrite these risks.
The cover provided by SASRIA includes indemnity for material damage to property and goods in transit, business interruption, and motor and construction risk, but excludes risks such as natural disasters, war, pandemics, theft, personal injuries, liability cover and loss of life (to name a few).
SASRIA cover usually operates by way of an extension to an existing insurance policy, in return for an additional premium. The additional premium amounts to a small percentage of the premium paid to the principal insurer. Accordingly, to be insured against the special risks mentioned above, there must be either an underlying insurance policy in place which includes SASRIA cover as an extension at the time of the event, or a stand-alone SASRIA policy.
SASRIA cover and looting
During the civil unrest, many businesses suffered large losses as a result of looting. Losses of this nature will be covered, but only if the looting occurs as a result of an active event of civil unrest, rioting, or other peril for which SASRIA accepts liability.
Causation:
From an insurer’s perspective in South Africa, the cause of a loss is determined by asking what was the "proximate cause" of the loss, and the court will ask two questions to determine whether the looting was caused by the civil unrest. These are:
- whether the looting would have happened “but for” the civil unrest, and if so
- whether there is a sufficiently close relationship between the civil unrest and the looting to give rise to legal liability, or whether there was some break in the cause of causation.
This approach, adopted in the COVID-19 Business Interruption case of Guardrisk Insurance Co Ltd v Café Cameleon CC [2021], and was applied in the recent case of Blackspear Holdings (Proprietary) Limited vs Bryte Insurance Company Limited and Sasria SOC Limited [2022].
SASRIA’S response to the 2021 civil unrest
Returning to the rioting and civil unrest suffered in South Africa in 2021, this mostly fell within the risk assumed by SASRIA as mentioned above. Any losses suffered as a result of the civil unrest were covered through SASRIA, and by July 2022, it had paid out eighty percent of all lodged claims, which was in excess of ZAR24 billion.
Due to the unprecedented extent of the claims made at the time (in excess of 14,000 claims), SASRIA had to request funds from the National Treasury to stay afloat. Amid some criticism against it, SASRIA was forced to admit that it was not prepared for the events of July 2021, having missed the warning signs in the lead up of the unrest. This was despite having a robust risk analysis programme in place. The political environment which prevails, especially within the ranks of the ruling party, has become a source of instability, and SASRIA will have the task of convincing reinsurers, many of whom are based overseas (and some in the London Market), to continue underwriting these risks.
Conclusion
Most people are unaware of what SASRIA cover is or why it would be relevant to them. However, in the current climate of uncertainty and volatility in South Africa, businesses cannot afford to overlook its benefits.
It is essential in my view to make provision for SASRIA cover, either as a stand-alone policy or preferably as an extension on existing insurance, in order to limit potential loss as a consequence of terrorism, civil unrest, protest, strike or riot action, which is uninsured under a regular insurance policy.
Charlotte Clarke is an associate in Mills & Reeve’s insurance team, and the political violence insurance sub-team. Charlotte is a South African qualified attorney and English qualified solicitor.
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