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South African state insurer in talks over larger bailout

SOUTH Africa’s state-owned insurance company Sasria is in talks with the National Treasury for a larger bailout than the 3.9 billion rand ($272 million) already promised, its managing director has told a parliamentary committee.

Sasria, the only insurer covering political violence in Africa’s most advanced economy, has suffered a sudden deterioration in its financial position after some of the worst violence in the post-apartheid era erupted in July soon after the arrest of former president Jacob Zuma.

More than 300 people died and around 3,000 shops were looted in the immediate aftermath of Zuma’s arrest, with anger over entrenched poverty and inequality fuelling the violence. The economic impact in the two worst-hit provinces of KwaZulu-Natal and Gauteng is estimated at tens of billions of rands.

“The 3.9 billion rand that we are talking about will not be enough on claims between 20 and 25 billion rand,” said Cedric Masondo, managing director of Sasria.

“The liquidity is not as big a problem for us as solvency … because we need to recapitalise the business. When we had a good balance sheet of 10 billion (rand), the riots wiped out that balance sheet so we need to recapitalise,” he said.

Using a 20 billion rand claims figure, Masondo said preliminary figures suggested Sasria would need an injection of around 5.6 billion rand to meet regulatory solvency.

“If the claims are above 25 billion we need probably (an) additional 7 billion,” he said.

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Last month, Masondo said Sasria would increase its premiums to cover a rise in reinsurance costs linked to the July riots.

Sasria is the latest state company to turn to the government for bailouts, with power utility Eskom and national airline South African Airways major beneficiaries in recent years. The government is trying to close the tap on further handouts given the weak state of the economy.

By The African Mirror