SA’s state-owned short-term insurer, Sasria, expects insurance claims arising from last week’s looting and anarchy to be so daunting that it might be forced to ask National Treasury for financial assistance. 

Approaching the Treasury (or the SA taxpayer) for financial assistance will be a first for Sasria in its 40-year history as the state-owned insurer has relied on its healthy balance sheet and not government bailouts for survival. 

Sasria now expects insurance claims of between R10-billion and R20-billion from businesses that have incurred damages to their insured property as a direct result of social unrest in Gauteng and KwaZulu-Natal. But this is a preliminary estimation, as Sasria’s team of insurance/claim adjusters is still counting the cost of the damage that has left 200 shopping malls and 3,000 stores destroyed.

The billions of rands in insurance claims might break Sasria and force Treasury to come to its rescue through a taxpayer-funded capital injection to its balance sheet. Put differently, Treasury might bail out Sasria, the only insurer in SA that provides cover for losses or damages to insured property as a direct result of civil unrest, including rioting, strike action, and public disorder. The political violence and riots before SA embraced democracy in 1994 have pushed private sector insurers to no longer provide cover for social unrests — leaving Sasria as the only insurer that does so. 

Cedric Masondo, the MD of Sasria, told SAfm’s Stephen Grootes that the insurer has been working with Treasury and the government to “prepare for the worst” as the value of insurance claims from affected businesses is likely to exceed the amount of cash that Sasria has on hand. 

“Should we exceed our capacity, there is an option on the table to work with the government so that we can pay the claims – even if it means that we require a capital injection,” Masondo told the radio station.  

“But the government, as a [sole] shareholder [of Sasria], is expected to provide capitalisation to Sasria. That’s what happens to companies when they run into trouble.”  

Masondo was not immediately available to comment further when Business Maverickreached out to him. 

A government bailout for Sasria would create a headache for Treasury, which is facing growing demands to fund income-relief measures for poor households and businesses affected by the social unrest. Business, labour, and community partners have agreed – through several meetings at the National Economic Development and Labour Council – on a range of income-relief measures, including using Sasria as the main mechanism through which destroyed businesses could be compensated for financial losses.