State-owned insurer the SA Special Risk Insurance Association (Sasria) has joined private insurers in preparing for a potential total collapse of the national electricity grid by informing its clients that should it occur, policyholders cannot claim for damages.
In the event of a grid collapse, which could trigger civil unrest similar to that experienced in July 2021, Sasria has informed its clients that the “reinsurance market has been urging it to eliminate its coverage for claims stemming from electricity grid failure as a result of the unprecedented levels of load-shedding”. The move to inform its clients of its new policy coverage comes less than a month before the start of winter. Eskom has yet to release its official system outlook for the winter months, when energy demand is expected to increase.
It also comes while SA is experiencing one of its worst load-shedding bouts, with unplanned breakdowns now frequently topping 16,000MW, compelling the power utility to implement higher stages of load-shedding at short notice. The deteriorating grid has sparked fears that Eskom may have to implement stages of load-shedding higher than stage 6, in which 6,000MW is removed from the grid and households and businesses experience up to 10 hours of power outages in a 24-hour cycle. On Friday, electricity minister Kgosientsho Ramokgopa conceded that the next 150 days will be “very difficult” as SA enters the peak winter period, in which energy demand is expected to peak at between 32,000MW and 36,000MW. Sasria, which provides cover for strikes, riots and other forms of civil unrest, says that from June 1 all its existing and new policies will exclude cover for electricity grid failure.
Looting and unrest
The insurer defines electricity grid failure as “the total or partial failure of, interference with, interruption of or suspension of any electricity supply, in any manner and from any source, and for any reason (including fortuitous or malicious damage and any inability) which affects an entire or major part of any municipal area (including local, district, regional or any other local government area created by law)”.
Sasria says in a circular to clients dated April 28: “Your Sasria policy will not indemnify you for any loss, damage, cost or expense, directly or indirectly caused by, arising out of, in any way or to any extent contributed to by, or in connection with electricity grid failure. “This exclusion applies to any riot, strike or public disorder (including civil commotion, labour disturbances or lockouts) directly or indirectly caused by, arising out of, in any way or to any extent contributed to by, or in connection with electricity grid failure.”
The July 2021 looting and unrest in KwaZulu-Natal and Gauteng resulted in widespread theft and damage to property, leading to claims of about R32bn against Sasria. By mid-July 2022 it had paid about R24bn in claims with 6,800 claims outstanding with a total value of R7bn, out of a total of 21,000. To assist in covering these claims, the government had to inject R22bn into the insurer, which was subjected to a sharp increase in reinsurance rates as the market leader, Lloyd’s of London, believed there would be a repeat of the July 2021 events in the next two or three years. It increased its reinsurance premium more than 1,000%, with other reinsurers following suit. Sasria says the exclusion also applies to “consequential or indirect losses in respect of any supply by public utilities that is affected in any way by electricity grid failure, including but not limited to, the disruption of water, telecommunications or sewerage supply or systems. It also includes any other direct or consequential or indirect losses such as the deterioration of any food or any other items.”
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