South Africa:Sanlam well-capitalised with pandemic reserve of $42m

By Zuhara Yusoff

Africa’s largest insurer Sanlam and its subsidiary Santam have issued shareholder notices on the impact of the COVID-19 outbreak on their operations. The pandemic will negatively impact the growth prospects of the group, but both businesses said that they are well-capitalised to ride out the storm.

“Sanlam is well-positioned to weather the current conditions – we have a solid balance sheet, strong operational processes and some of the best expertise available in the market,” said a group statement.

Sanlam reported solid performance for the first two months of the year, with new business volumes rising 30%. The insurer said it would pay its 2019 dividend despite the COVID-19 outbreak threatening South Africa’s fragile economic outlook.

The group’s policy liabilities as at 31 December 2019 included a pandemic reserve of R760m ($42.3m), created a number of years ago for an event of this nature, Sanlam said. “This reserve is available to cover increased mortality experience emanating from COVID-19.”

The group said so far it has not been exposed to any major changes in claims.

“The development of claims experience will be dependent on, among others, the infection rate in the markets where we provide cover, the ability of the local healthcare infrastructure to cope with the number of individuals requiring hospitalisation and the eventual mortality rate,” said the statement.

The insurer believes that the decision taken by many governments to implement lockdowns should limit infection rates and mortality experience.

Many of the markets in which Sanlam operates, such as Namibia, Morocco, Lebanon, Malaysia, India, the UK and Cote d’Ivoire, are on lockdown to slow the spread of the coronavirus. South Africa is on a 21-day lockdown.

Meanwhile, Santam is in the process of reviewing relevant policy wordings in order to assess the insurance exposure related to COVID-19 and how its policies can respond best to the related claims.

“The impact of COVID-19 on general insurance claims is, among others, dependent on governments’ response to the pandemic. Some governments are considering requirements for insurers to pay medical costs even if this is not covered under the policy contracts, or to contribute voluntarily to relief funds.

“Despite limited contractual exposure in many instances, measures implemented by governments may therefore still have an impact,” the group said.

Sanlam said in the case of health insurance, exposure to COVID-19 claims is dependent on policy conditions, which vary between countries. These conditions generally exclude pandemics and/or pandemics where quarantine is implemented.

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