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Drought hits Santam hard as farmers claim R230m for crops

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Santam. Picture: Duncan Alfreds/Fin24
Santam. Picture: Duncan Alfreds/Fin24
Santam this week announced that the devastating drought, which is still affecting large parts of the country, caused it to suffer a loss in the first half of this year because of its crop insurance business, which provides farmers with drought cover.

Santam CEO Lizé Lambrechts said the company had received gross crop insurance claims of R469 million during the six months to June, of which R231 million were drought claims.

Lambrechts said much of the drought insurance was reinsured or transferred to another insurer to provide protection against loss, and the whole drought-related loss did not go to the bottom line.

She said that Santam had the highest market share in providing farmers with insurance against drought conditions.

Santam is also one of only three companies in the country that provide farmers with insurance cover against drought. The other two companies are Mutual & Federal and AgriSeker, which is the underwriting agent for the Land Bank Insurance Company’s crop insurance programme.

Santam’s crop insurance business achieved a net underwriting profit of R8 million, down 85% from R53 million in the first half of last year.

Gross written premiums for the crop insurance business came to R108 million, up 62% from R67 million in the first half of last year.

Lambrechts said that insuring against drought was a “feast-and-famine” business and that Santam wasn’t planning to redesign its drought product because of recent events.

Santam said that the effect of the catastrophic hailstorms in Gauteng and North West in January was significantly reduced by recoveries from a sideways catastrophe reinsurance programme.

Philip du Preez, head of Mutual & Federal’s agricultural division, said the company had received 1 647 drought-related claims this year from the 754 drought-related policies on its books.

Du Preez declined to disclose Mutual & Federal’s profit or loss ratio as a result of the claims.
In response to a question about whether Mutual & Federal would be adjusting its drought-related insurance policies or pricing as a result of the severity of the prevailing drought, Du Preez said that the company was constantly re-evaluating its risk premiums and would continue with this approach as it had in previous years.

AgriSeker last month said it had received 230 claims against its drought policies.

The company has 270 policies covering a crop value of nearly R1 billion.

The claims had resulted in a devastating loss ratio of 239%, which means that for every R1 paid to the company in premiums, more than R2 had been paid out in claims.

Of AgriSeker’s payout in drought claims, summer crops made up 90% of the claims and winter crops the rest.

Most of AgriSeker’s summer crop claims were for maize and sorghum, and came from the Free State and North West.
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