South Africa's insurance risk pool is affected by a number of trends and changes that have materially impacted risk profiles and claims patterns. It has been important to adapt underwriting and risk management strategies to take account of these to achieve Santam's strategic objectives.
Some of the more important drivers of change were:
a greater incidence of weather-related catastrophes, flooding and hail in particular;
weakening fire-fighting capacity in local municipalities in South Africa as well as weakening standards of fire safety certification for commercial properties; and
- improved availability of information and technologies to prove, track and reward superior risk management.
Santam has responded proactively by:
improving its risk assessment capabilities and rewarding clients;
geocoding property risk to enhance landscape-based risk assessment;
providing support to local authorities in the areas of fire and flood risk management; and
- driving industry initiatives to set and encourage adherence to appropriate national standards for fire safety to name only a few.
Santam believes that key to managing these systemic risks is an integrated approach to managing long-term sustainability through the improved management of systemic risk which is aligned with the strategic drivers of the business. Through their strategic actions and participation in local and global associations, the company aims to promote sustainable insurance that is essentially about reducing risk, developing innovative solutions, improving business performance, and contributing to environmental, social and economic sustainability.
A key stakeholder to embed this is municipalities as they bear the responsibility of managing the ramifications of volatile weather conditions and climate change-related disasters. The insurer's involvement and partnerships with municipalities across South Africa provide a platform to create awareness of how best to address climate risk, to acknowledge the successes of municipalities, and help increase their capacity to manage disasters and assess risks.
Santam has achieved significant success through its Business Adopt-a-Municipality (BAAM) programme, which identifies vulnerable municipalities and provides support inaddressing disaster management more effectively. BAAM is a strategic partnership between Santam, the Department of Coorporative Governance (DCoG), the South African Local Government Association (SALGA) and the private sector to assist municipalities to improve sustainability and service delivery in respect of fire-fighting, flood and storm water management.
The insurer remains committed to working in partnership with local government to strengthen the institutional capacity of local municipalities to deliver basic services to communities, hereby assisting government to achieve the principles of the back to basics programme. The company further partners with various organisations to look at innovative solutions to mitigate higher levels of risk and prepare communities as well as possible for potential disasters, such as flooding or hail storms.
The success of the BAAM initiative has now enabled Santam to expand this work to include 10 further district municipalities throughout South Africa which comprises 54 local municipalities. Focusing on these high risk areas will enable Santam to drive risk mitigation and risk reduction interventions and initiatives in areas where the business has historically suffered huge losses due to flooding. The primary focus would be to mitigate the potential of insurance losses and where such losses have occurred, to potentially reduce their total value.
Santam set out to work in partnership with the Municipal Infrastructure Support Agency (MISA) and the National Disaster Management Centre (NDMC) to identify the drivers of flooding, capacitate the district municipalities and pro-actively build resilience in the landscape to reduce the impact of flooding on lives, municipal infrastructure and assets that Santam underwrites.
To date Santam has been working with five municipalities: Mahikeng (Mafikeng) Local Municipality (North West); Thulamela Local Municipality (Limpopo); Ulundi Local Municipality (KwaZulu-Natal); Mbombela Local Municipality (Mpumalanga) and Eden District Municipality (Western Cape). Fire and flood damage insurance claims in the municipal areas chosen have been high and the first phase saw training and fire-fighting equipment being presented to these municipalities. Santam has also worked towards building their capacity in fire-fighting and disaster management and phase 2 of BAAM sets out to understand the drivers of flooding, evaluate the capacity of the municipalities and communities to deal with the impact of floods effectively, and propose recommendations to assist in dealing with these events more effectively. This will extend into 2015.
Further impact at municipal level
Santam expanded into further districts by launching in Ehlanzeni District (Mpumalanga) which will cover the following local municipalities: Bushbuck Ridge, Thaba Chewu, Nkomazi, Umjindi and Mbombela Local Municipality. The company experienced large claims as a result of flooding in this district over the past few years and believes that proactively identifying flood risk mitigation actions with these municipalities will assist the business to reduce the extent of the losses incurred in that area in future.
Ultimately, through their efforts the insurer aspires to maximise socio-economic welfare, enhance stakeholders' sustainability and build a more resilient South Africa through the provision of risk solutions to our clients. They believe the work that they are doing does not only benefit the insurance industry in managing the national risk pool, but also helps to save lives, and build national resilience.
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