Lancashire highlights political risk growth as market braces for potential $1 billion SA loss

Bermuda-listed carrier Lancashire highlighted opportunities for growth in the political risk class during the first six months of the year as gross premiums written increased by 40.7% compared to the same period in 2020.

Lancashire said the most significant growth in dollar terms occurred in the property and casualty reinsurance segment, “primarily due to growth in the property direct and facultative class of business as we continued to build out our book at RPIs of 108%”.

However it added: “We also saw opportunities to write new business in the political risk class which benefited from increasing transactions globally and opportunities in new territories.”

Lancashire’s spotlight on political risk comes as the wider market braces itself for potentially huge losses as a result of the recent South African rioting.

State-owned insurer Sasria has estimated that the days of civil unrest across South Africa could drive insured losses of between 7 billion rand and 10 billion rand ($481 million to $683 million).

However, other reports in the wider media have suggested that the ultimate loss figure could climb as high as $1 billion.

Sasria told Reuters that the losses would mostly stem from damage and theft from businesses, following widespread vandalism and looting, which has impacted thousands of properties and damaged major infrastructure.

The violence has its origins in demonstrations against the arrest of former President Jacob Zuma, but those sensing an opportunity to enrich themselves transformed the demonstrations into a looting spree, the government has said.

At least 117 people have died and authorities have made almost 1,500 arrests to date.

Listed companies to have reported the extent of their exposure include foods maker Tiger Brands, which said it lost 150 million rand of stock, and clothes retailer Mr Price Group, which saw 109 stores entirely cleaned out and hundreds more closed.

The rioting also affected countless smaller businesses, many in under privileged parts of the coastal city of Durban and Johannesburg, the economic hub.

Sasria, set up in 1974 after private insurers stopped underwriting political violence risks in South Africa, has reinsurance cover that runs into the high single digits and can fund up to 10 billion rand of claims from its own balance sheet.

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