The majority of JSE-listed companies are multimillion-rand entities with significant geographic footprints and multiple suppliers and clients, which results in a diverse set of risks all along the value chain. These risks need to be quantified and transferred to an insurer for a monthly or annual premium. As part of ensuring the overall health and continuity of a public company, risk management is a requirement, especially in light of economic volatility, as well as the increasing frequency and severity of climate change and ongoing cyberthreats. To follow are essential insights and risk-specific insurance options.
‘Like a change in the weather, business disruption is inevitable,’ says Quinten Matthew, executive head for specialist business at Santam. ‘Protecting fixed, moveable and people assets is critical. We’ve seen dramatic increases in natural catastrophes recently and from our experience, businesses that use insurance to mitigate climate change risks are more likely to survive disruption.’
Santam’s interim results for the six months to June 2017 showed an 8% growth in gross written premiums for specialist business. In the period under review, the underwriting performance of the commercial and corporate property classes came under pressure after an increase in large corporate property claims – tough economic times often filter through to claims as maintenance and safety standards are compromised. ‘For the rest of the year, we will be expanding capacity in the areas of risk management and surveying, with our under-writing and risk management actions focused on the commercial and corporate property classes of business,’ according to Matthew.
In addition to business interruption insurance, cyber insurance is also becoming a necessity for just about any business. The ubiquitous nature of technology has catalysed a correlating rise in exposure to online threats. During 2017, numerous organisations – from governments to NGOs to giant multinationals – have been targeted (and infiltrated) by hackers.
In September, Equifax (a credit rating agency based in the US) was the target of a cyberattack that resulted in the credit records and personal information of almost half of America’s population being exposed – an indictment of the company’s online security controls.
Regardless of the industry, it seems that all companies now face cyber risks. Cisco’s mid-year Cyber Security Report, which included a survey of nearly 3 000 security leaders across 13 countries, revealed that even in the most responsive industries (such as finance and healthcare), businesses are mitigating less than 50% of cyberattacks they know are legitimate.
Of the cyberthreats investigated within the public sector, 32% were identified as legitimate, but only 47% of these were eventually remediated. Among the retailers interviewed, 32% said they lost revenue due to attacks in the past year, with about a quarter losing customers or business opportunities.
With a multitude of specialist insurance options available, Matthew says it’s about determining which offering strategically aligns with a business’ working risk model. He advises all JSE-listed entities to obtain property and casualty cover as protection against the cost of physical loss or damage to buildings. Additionally, he suggests third-party liability cover and the advance loss of profit coverage to dispel the effect of business interruptions. Being adequately protected is vital for companies looking to expand across Africa, as each country presents a different set of risks.
Santam has an expansive footprint throughout the continent and engages with companies and projects across all sectors. Following the acquisition of RMB Structured Insurance (now called Santam Structured Insurance), and coupled with its vast footprint and tailored skills, the company has incorporated specialist regulation-compliant expertise to cater for an extensive range of risk mitigation and transfer capabilities.
The pricing of specialist insurance to cover JSE-listed entities is subject to the comprehensiveness of the risk analysis conducted, which can require political and social risk-mapping assessments depending on a company’s scope and scale, as well as its risk culture and appetite.
‘Business resiliency starts with effective risk management, and specialist insurance is the key to long-term survival,’ says Matthew. According to the 2017 PwC Risk in Review survey – a global study of corporate officers across 30 industries and spanning more than 80 countries – aligning risk management with strategy at the point of decision-making is critical in enabling organisations to react faster to risks and disruptions. Decision-makers are advised to embed risk management into both strategic planning and tactical execution.
