By: South African Association of Engineering Insurers (SAAEI)

Reshaping the landscape of South Africa’s engineering insurance

A staggering 3 000% surge in global Strike, Riot and Civil Commotion (SRCC) claims over the past two decades, coupled with South Africa's construction industry decline since 2016, is forcing a radical transformation in engineering insurance.

These challenges took centre stage at the 6^th annual conference of South African Association of Engineer Insurers (SAAEI), held under the auspices of the South African Insurance Association (SAIA) on 28 – 29 October 2024.

According to SAAEI Chairperson, Chris Charlton, “the construction and engineering space is seeing escalating technology enhancements as processes become more efficient”. Discussions echoed this sentiment as speakers lamented the hanging engineering insurance landscape and how to navigate it to ensure the sector’s sustainability.

The conference, themed “Open to Learn” revealed critical challenges facing the sector, including the ongoing threats of the “construction mafia” and an unprecedented move towards renewable energy projects, especially in the mining sector.

Dr Hubert Joynt, Programme Manager of the Centre of Excellence at Infrastructure South Africa (ISA), laid the groundwork for other discussions spoke on the Economic Outlook for South Africa’s Construction industry. The industry, he says, has been in a decline since 2016, characterised by a downward trend in completed buildings. Adding to this, is a decline in labour productivity and government departments’ inability to spend allocated budgets, putting a serious dent to the 2030 National Development Plan targets.  To address this, Joynt, made  valuable recommendations including addressing institutional arrangements, centralised planning and prioritisation, accelerated budget reforms, addressing municipal infrastructure constraints, unlocking other income sources, and economic regulation.

The construction mafia and the distinction between the South African Special Risks Insurance Association (SASRIA) and underlying engineering policies, and identifying gaps in covers, were covered by Senior Associate at Norton Fulbright South Africa Inc, Rethabile Shabalala and SASRIA Executive, Themba Sibiya. The speakers highlighted the impact this risk has on construction timelines and the work quality, necessitating  urgent intervention.

Director of M Squared Resources, Kobus Breytenbach, discussed renewable energy and its impact on the mining sector. With the rising electricity costs, alternative energy sources are seriously being considered. Breytenbach mentioned mining houses successfully pursuing renewable energy to save on their electricity bills and exceed Environmental, Social and Governance (ESG) compliance.

Legal experts David Vleck from Cox Yeats, and Martin Vass  from Specialists Adjusters, gave sobering presentations on recent building collapses and incidents. Policy wording becomes a major talking point after such disasters. Clyde & Co’s, legal director, Hickley Hamman, engaged the delegates on navigating non-disclosures and misrepresentations by the insureds. The reoccurring theme was ensuring no ambiguity in the policy wording.

Reinsurers were well represented as Swiss Re and Regional Manager Kevin Stanley and Insurance Attorney Matthew Scorgie spoke on the shifting reinsurance appetite for Strike, Riot and Civil Commotion (SRCC) risk and its implications for engineering in Africa. They discussed the massive 3 000% increase in SRCC claims globally in the last two decades, attributed to social, economic, and geopolitical factors. In a history lesson-style presentation, Munich Re Senior Underwriter Romeo Outarra addressed  Inherent Defective Insurance (IDI), referencing the 21 March  1804 French civil code implemented by Napoleon  Bonaparte—to explain what a decennial policy (an IDI) in this day and age includes and excludes.

The SAAEI conference is a key industry event. This year highlighted the pivotal challenges and opportunities facing the sector. From tackling the members’ concerns over the construction mafia to adapting to renewable energy trends. As technology evolves and the risk landscape shifts, such forums a crucial place at which professionals can share insights and develop solutions. The diverse range of topics underscored the complexity of modern engineering insurance and the need for continued collaboration and knowledge-sharing.