Pamela Ramagaga | Fire and localised flooding remain systemic risks

Top causes of loss in South Africa are firstly, fires which generate the most expensive losses for South African businesses, accounting for more than 60% of the value of all claims over the past five years. Secondly, faulty workmanship incidents (e.g., hot works) are a major contributor as well, contributing to 20% of fire losses and third, are natural catastrophes with storm losses being the most frequent driver of these claims.

The latter, as seen with the KZN floods, is increasing exponentially due to climate change. Incidents such as hailstorms are costly when they do occur. Water damage generates the highest number of corporate insurance claims in South Africa (30%+).

In recent years, certain risks have evolved into systemic risks, such as property fire risks and localised flooding risks therefore requiring SAIA as the non-life insurance industry trade association to support its members, through industry initiatives aimed at addressing these risks.

Systemic risks are risks which cannot be managed by the insurance industry, that is, these risks jeopardise the sustainability of the non-life insurance industry. If not managed, in collaboration with the government (or relevant organ of state) in most instances, they could result in the breakdown of an entire system rather than simply the failure of its individual parts.

The fire brigade classification initiative was developed by SAIA to address the property fire and localised flooding risks in the interest of its members but broader than that, to safeguard lives that would otherwise be lost if these risks are not efficiently managed.

SAIA started an initiative in 2020/21 to risk manage fire and localised flooding risks because of the plight of property members in terms of the claims experienced from these risks. If the industry does not directly address these risks in collaboration with the government (i.e., the respective organs of state responsible for managing fire services and relevant infrastructures), it will put continuation of insuring these risks in jeopardy.

SAIA contracted the services of the Fire Protection Association of Southern Africa (FPASA) to project manage this industry initiative. The Fire Protection Association of Southern Africa (FPASA) was established in 1973 to provide a specialised fire safety management technical and training service to industry, commerce, fire and rescue services and society at large. Over the years the Association has developed a range of membership options and technical, training and fire safety management services that are recognized for their quality, professionalism, and value. Today the role of the FPASA covers fire safety education, information, advice, consultancy, and training (Fire College).

The first milestone is a view of the condition of fire services in all nine (9) provinces to inform the strategic engagement and collaboration in terms of the interventions needed to alleviate the possible constraints some of the fire service(s) might have, therefore, jeopardise their responsibility to fight fires to save lives and property. The second milestone will be a clear action plan with the government to remove constraints in fire services and the time needed to do so.

There is urgency in the system and with the recent draft infrastructure plan to 2050 issued by government, there is already a plan that can assist in this plight therefore the information gathered by the non-life insurance industry is the empirical data needed to know where to plug in as the government and most importantly, where is it urgent to plug in, where timeous interventions would be needed.

The industry developed a fire service application mirroring the requirements under the standard developed by the government (SANS 10090:2018) in terms of what a fire service should have for it to fulfil its mandate. To date, a hundred and eight (108) fire services have been graded using the application (App). There are 278 municipalities in South Africa, comprising of eight (8) metropolitans (metros), forty-four (44) districts, and 226 local municipalities.

Most fire services can be found under the management of local municipalities, therefore as a gauge, the App has been applied in 48% of the municipalities, leaving the remaining 52% still to be assessed.  FPASA has confirmed that by end of 2022, the association would have completed assessments for fire services in seven (7) provinces. The FPASA envisions the remaining fire services can be assessed in 2023.

*Pamela Ramagaga is General Manager: Insurance Risks at the South African Insurance Association (SAIA).