Santam this week announced that the devastating drought, which is
still affecting large parts of the country, caused it to suffer a loss in the
first half of this year because of its crop insurance business, which provides
farmers with drought cover.
Santam CEO Lizé Lambrechts said the company had received gross crop
insurance claims of R469 million during the six months to June, of which
R231 million were drought claims.
Lambrechts said much of the drought insurance was reinsured or
transferred to another insurer to provide protection against loss, and the whole
drought-related loss did not go to the bottom line.
She said that Santam had the highest market share in providing
farmers with insurance against drought conditions.
Santam is also one of only three companies in the country that
provide farmers with insurance cover against drought. The other two companies
are Mutual & Federal and AgriSeker, which is the underwriting agent for the
Land Bank Insurance Company’s crop insurance programme.
Santam’s crop insurance business achieved a net underwriting profit
of R8 million, down 85% from R53 million in the first half of last year.
Gross written premiums for the crop insurance business came to
R108 million, up 62% from R67 million in the first half of last year.
Lambrechts said that insuring against drought was a
“feast-and-famine” business and that Santam wasn’t planning to redesign its
drought product because of recent events.
Santam said that the effect of the catastrophic hailstorms in
Gauteng and North West in January was significantly reduced by recoveries from a
sideways catastrophe reinsurance programme.
Philip du Preez, head of Mutual & Federal’s agricultural
division, said the company had received 1 647 drought-related claims this year
from the 754 drought-related policies on its books.
Du Preez declined to disclose Mutual & Federal’s profit or loss
ratio as a result of the claims.
In response to a question about whether Mutual & Federal would
be adjusting its drought-related insurance policies or pricing as a result of
the severity of the prevailing drought, Du Preez said that the company was
constantly re-evaluating its risk premiums and would continue with this approach
as it had in previous years.
AgriSeker last month said it had received 230 claims against its
drought policies.
The company has 270 policies covering a crop value of nearly
R1 billion.
The claims had resulted in a devastating loss ratio of 239%, which
means that for every R1 paid to the company in premiums, more than R2 had been
paid out in claims.
Of AgriSeker’s payout in drought claims, summer crops made up 90%
of the claims and winter crops the rest.
Most of AgriSeker’s summer crop claims were for maize and sorghum,
and came from the Free State and North West.