The impact of comprehensive silo insurance on the cost of grain storage

3 min read 18 October 2021

As the leading general insurer in South Africa, Santam believes that insurance should be regarded not only as a protection mechanism, but more importantly as a partnership between the client and the insurer with effective risk management at the core. A thriving insurance sector is critical to any healthy economy. It promotes financial stability and economic growth, and it allows different risks to be managed more efficiently to reduces the impact of events that cause financial loss.

‘Insurance is the DNA of the economy. Without insurance, nothing is built, nobody works, nothing floats, nothing runs on tracks, and nothing ships. It rebuilds lives, cities, and companies. The World Trade Center would not be rebuilt without the insurance industry, which pumped $4.4 billion into it.” (Joseph J. Plumeri, former Chairman and CEO, Willis Group Holdings plc.)

The insurance industry has a major role to play in protecting clients and businesses from losses that are diversifiable.

In the agricultural environment, silos have become an integral component of a grain storage management system. Therefore, it necessitates the need for comprehensive insurance of the asset against any eventuality, either weather-related events or other unexpected accidents.

It is imperative that farmers and producers are covered against losses, which can be extensive if large silos, bins and equipment are damaged.

As with any structure, a silo must be properly designed, constructed and maintained to enjoy insurance cover and ensure it has a  long, useful, and safe life. Maintenance of a silo, required for insurance purposes,  includes the repair of the walls and/or inner liner used to promote flow and the periodic inspection of roof vents, level probes, feeders, dischargers, and gates

In addition to this, it is helpful for silo owners to understand their main risk exposures and work with their intermediaries and insurers to make sure that have the right cover in place as well as importantly, the right risk management practices. Fire and explosion are main risks that are explained below.

All silo facilities are equipped to receive grain, and store and discharge it effectively. Drying and cleaning facilities are all part of the operations of grain storage. Grain dryer fires are one of the most significant risks a grain handling operation can face. The devastating results of fire can include death, serious injury, financial loss, property damage, and business interruption with production downtime.

Dust explosions are a frequent hazard in grain elevators or oxygen-limiting silos. This hazard is more prevalent during the process of receiving and discharging grain, as static electricity is generated in these processes, and without effective ways of discharging this static charge the risk of dust explosion is increased.

Risk management with regards to hazardous areas and electrical installations

The SANS Hazardous Area Classification and SANS 10108 certification are integral parts of regulating and managing hazardous areas and their electrical installations. They are especially important in safeguarding employees and equipment through the prevention of electrical fires and explosions. Special attention should be given to this regulation.

Grain storage risk management

The use of silo bags is another option to store grain. The contents can also be covered under the insurance policy. It is important to manage the surface area in terms of clearance of combustible material and the angle of the area so that rainwater can run off and not damage the grain. Theft cover is available to grain dealers with silo bags when the necessary risk management is in place. This can refer to 24h security guards, flood lights, security gates, etc.

A silo bunker is the latest innovation and is basically a large cement dam like structure which holds the crop and is covered with a canvas like sail and can be exposed to the same risk being mentioned here

Other factors that must be noted in the risk management of silos are the importance of effective management of grain storage as grain can rapidly deteriorate, as well as run the risk of severe damage from lightning strikes as silos are generally the tallest structures on the farm. While lightning rod protection systems can prevent damage to the structure, damage and fire can still result if lightning strikes hit the facility’s electrical system.

Loading or unloading belts, pulleys, shafts, and other mechanical apparatus in silos are also subject to mechanical failure and overheating. New motors used in silos and feed rooms have safety devices; but many older electrical motors have been modified and supporting wiring and circuitry may be substandard. Older or misapplied units such as these are prone to arcing and overheating.

Ultimately it is vital that the producer undertakes a proper needs analysis, in close cooperation with an intermediary to ensure all the risk factors are taken into consideration.

Santam’s Agri insurance products were developed around the specific needs of the farmer and our cover is specific to the unique risks and requirements of the agricultural sector.

Contact your intermediary or visit for more details about Santam’s comprehensive agriculture insurance solutions.