- Sasria has warned that its projections show the insurer will likely make a loss of R26 billion.
- The insurer said its balance sheet would not be able to accommodate claims volumes similar to those it saw during the July unrest.
- Sasria told Parliament that it has received a R22 billion capital injection from National Treasury.
The South African Special Risks Insurance Association (Sasria) says that despite getting a R22-billion capital injection from National Treasury, it is still projected to suffer a loss of about R26 billion in the 2021/22 financial year.
The insurer warned Parliament's Select Committee on Finance on Tuesday that its current balance sheet was inadequate for another R37 billion claims event like the July unrest in KwaZulu-Natal and parts of Gauteng. Early warning signals indicated that Sasria could suffer another loss if interventions were not urgently implemented.
Sasria's written submission to the committee also indicated that it projected a loss of R26 billion after tax for 2021-22, compared to a profit of R1.5 billion in 2020-21 after tax.
The submission said Sasria's insurance contract liabilities were projected to rise from R1.3 billion in 2020-21 to R15.8 billion for 2021-22.
Newly appointed CEO Mpumelelo Tyikwe said the solvency ratio of Sasria went down significantly due to the riots in July and the continuing backlog in claims from businesses affected by the violence.
"For the year 2022, our solvency was standing at 68%. Our regulator, the Prudential Authority, has instructed us that by June 2022, we have to be above 100%. We are currently projecting that in June, with a capital injection, the reinsurance arrangement, we will be sitting at 115%," said Tyikwe.
Tyikwe told the select committee that this solvency projection was made assuming that Sasria would have settled 90% of the claims in their backlog and a R37 billion claims avalanche.
DA MP Dennis Ryder asked Tyikwe how it hoped to support small, medium and micro enterprises (SMMEs) still waiting for their claims to be processed after July's unrest and how much of the delays in assisting them could be attributed to Sasria's financial constraints.
"We know 30% of claims are still outstanding. Certain rebuilding operations are taking place, and it will take time for these invoices to flow over. SMMEs have been paying premiums and are still struggling with their claims," asked Ryder.
Tyikwe said SMMEs that Sasria has enough cash to meet current claims and capital requirements with National Treasury's cash injection.
Tyikwe said while recent flooding in KwaZulu Natal did not fall firmly within its mandate, Sasria was speaking with National Treasury about investigating ways in which it can extend cover in instances like drought and flooding. However, these engagements remain in the very early stages.
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