Following short-term insurer Santam’s strong interim results, the business is pushing forward with strategic expansion into Africa in partnership with Sanlam Emerging Markets. As part of this expansion, Santam Specialist Business has launched a Seamless Specialist Insurance solution which offers comprehensive risk protection for mega-projects across Africa.
The development of infrastructure is the primary driver of economic growth in East, Central and West Africa – mega-infrastructure projects include dams, transport infrastructure and renewable energy projects and plants. These projects require innovation, a high level of underwriting expertise and the special technical knowledge of a large insurer to effectively mitigate risk.
Santam’s Seamless Specialist Insurance solution is aimed at corporations that are involved with complex projects in the infrastructure development, energy and related industry sectors, in recognition of the importance of South Africa’s National Development Plan (NDP) in achieving future growth and prosperity.
“Mega-projects have specific insurance needs requiring the highest level of technical expertise and experience,” says Karl Bishop, head of niche business at Santam. “We have partnered with our niche underwriters to offer a Seamless Specialist Insurance policy targeted at large and mega-infrastructure projects both in South Africa and the rest of the continent.”
The NDP hinges on infrastructure development and more than R4 trillion has been budgeted for government infrastructure in South Africa over the next two decades. The first R845 billion has been shortlisted for Strategic Infrastructure Projects (SIPs) up to 2015.
The R2.9 billion privately-funded Jeffrey’s Bay wind farm project, recently inaugurated in the Eastern Cape, is an example of a SIP in action. Its 60 newly installed wind turbines will be able to supply enough clean energy to meet the needs of 100 000 average households over the next 20 years.
Projects of this size are extremely complex and involve close interaction between financiers, lenders, construction companies, energy and chemical companies, as well as state-owned companies. The wind turbine project took more than 18 months to complete and involved 1.2 million man hours and a 110 000km transportation programme.
Mega-infrastructure projects have massive price tags with equally large insurable risks. Deloitte (African Construction Trends Report 2013) reported five US$2 billion-plus projects underway in South Africa in2013. These include the Kusile and Medupi power station construction projects, the Mthombo fuel refiner, the Transnet multi-products pipeline and the Venetia diamond mine. The report singled out energy, transport and mining as the major drivers of construction activity throughout Africa.
Convenience and appropriate risk identification are vital when placing cover for complex mega-projects. The basis of a seamless insurance solution is that the client, whether the insured or an intermediary, does not have to deal with a number of different insurance parties and risk gaps in cover.
Santam Specialist Business has structured its solution through partnership with a number of its niche underwriters to enable potential clients to cover all bases of insurance via a single touch-point. Insurance buyers, with assistance from their commercial or corporate broker, will be able to take up cover for public liability, (single projects) professional indemnity, marine, contracts works, project delay, assets and travel insurance as well as riot cover.
The policy will be issued and administered by MIRABILIS Engineering Underwriting Managers, which will cover all aspects of the project by distributing comprehensive cover and managing the entire process from policy issuing to claims handling and processing.
Santam says it will market and distribute the seamless solution through corporate and commercial broker firms. “Clients in the specialist business sector expect to work with intermediaries and insurers that understand their needs and offer bespoke risk management solutions that are appropriate at different stages of their business journey,” says Bishop.
Interest in the product is expected to surge as the African infrastructure boom kicks into high gear. Infrastructure development also presents opportunities in the rest of Africa. The African Development Bank offers funding support to more than 100 projects in the forms of loans and grants totalling US$7 billion. Deloitte has confirmed that there were 322 construction projects with price tickets in excess of US$50 million underway as at 1 June 2013.
“Seamless insurance can realise the benefits of opportunities in the rest of Africa and can assist in much-needed economic growth and development, a fact that ought to benefit short-term brokers as well,” says Bishop. The insurer is keen to expand its underwriting capacity in the rest of Africa and will do so by presenting a ‘single Santam brand’, backed up by the expertise of niche business units.