The air was electric as IIG members excitedly gathered for our first In-Person Insights in 3yrs since the pandemic. We were hosted at Deloitte’s beautiful auditoriums at Waterfall City where the Edu Team were in full force to meet and greet our guests.
IIG Deputy President, Bukhosi Khumalo was the resident MC for the morning and welcomed all as he expressed his excitement to be a part of the in-person session. He briefly outlined the theme of risk management. He then introduced our stunning and always eloquent IIG President, Simphiwe Mtyali who echoed a similar sentiment of being thrilled to be a part of the in-person session. She reiterated that networking uplifts and changes the dynamic of being in-person. Online webinars will certainly remain a continuous feature, but hopefully, in-person sessions will once again become a part of the norm. Simphiwe also reminded everyone of the upcoming IIG International trip to Paris. The theme was quite apt in terms of the unrest experienced globally. It’s scary that this is the 9th consecutive year reflecting a decrease in peacefulness. The unemployment rate continues to rise as most people have just given up hope. All these stats are even more reasons why we shouldn’t stop looking for ways to mitigate risk. We must be proactive in how we look at risk. Simphiwe then thanked Emerald for being our main sponsor and Syfinity for their support services.
Bukhosi then introduced the first speaker, Renay Sewpersad. Renay is currently the Executive Director: Insurance Projects at Fire Protection Association of Southern Africa (FPASA). She is responsible for the implementation of policy approved by the Board of Directors of the FPASA, operations and strategy, organising, planning, coordinating and control of all functions of the FPASA. She participates in Board, audit, risk & compliance, stakeholder engagement, pre-financial audits, and post-financial audits. Renay’s
enviable accolades include a BSc. Chemical Engineering, MSc. Chemical Engineering (cum laude), a Post-Grad diploma in General Management and an MBA (dissertation with distinction).
Renay thanked Emerald and the IIG and kicked off with her highly informative presentation. She emphasized that underwriting and risk management work in tandem as one requires a high-level view and to work collaboratively to make an assessment. She used the example of OMI having a top tier underwriting team. Interestingly, ChatGPT is an excellent tool for underwriters as it provides a high levelled overview. One just needs to input the correct criteria such as, what do you include/exclude for cover etc., however a risk management team is always necessary. Cyberthreat is also dangerously increasing for example, fighter jets that are fully automated can then be hacked into resulting in all kinds of threats including war.
It’s important to separate the underwriting and sales functions, as underwriting can sometimes comprise on sales, and it is recommended to separate these functions. Renay touched on an aspect not often spoken about, that being peer pressure and its impact, as one company once almost lost R500 million through a bad risk written due to internal pressures. In South Africa we have a standard for fire, however this does not stop a company from implementing international fire standards for superior protection. If a client has not adhered to a risk recommendation, an Insurer can repudiate the claim if it’s a result of not adhering to that recommendation. Ultimately, if you’re protecting property, you protect lives.
Renay then provided examples of cases in history where companies which only had underwriting teams (and no fire risk team) made mistakes and the insurer suffered large losses as a consequence, a total of £37 Billion was lost. If we don’t learn from history, history will repeat itself.
Cases in History:
• Great Fire of London (1666)
• Triangle Shirtwaist Factory Fire (1911)
• MGM Grand Hotel Fire (1980)
Triangle Shirtwaist Factory Fire
The Great Fire of London
MGM Grand Hotel Fire
These examples highlight the importance of comprehensive risk management, including fire risk management, in the insurance industry. Having dedicated departments or teams that assess and address fire risks beyond underwriting can help identify vulnerabilities, implement proper risk mitigation measures, and reduce the likelihood and impact of fire-related losses.
It’s worth noting that the insurance industry has since evolved, placing a stronger emphasis on risk management across various domains, including fire risks. Regulatory requirements, improved fire safety standards, and advancements in risk assessment methodologies have contributed to better risk management practices within insurance companies, reducing the likelihood of such large losses.
Recent major fires where inadequate fire risk management played a role:
• Grenfell Tower Fire (2017)
• Ghost Ship Warehouse Fire (2016)
• Kiss Nightclub Fire (2013)
Grenfell Tower Fire
Ghost Ship Warehouse
Kiss Nightclub Fire (2013)
These examples demonstrate the potential consequences of inadequate fire risk management and the importance of comprehensive fire safety practices. They emphasize the need for effective risk assessments, appropriate fire prevention measures, and robust fire emergency plans to mitigate the risks associated with fire incidents.
How can insurers adapt to this in a way that the covers they provide remain sufficient and adaptable?
• Insurers can Adapt to underwriting and fire risk management strategies.
• Data driven underwriting.
• Risk segmentation
• Loss control and risk mitigation programs
• Collaboration with policyholders
• Continuous risk monitoring and adjustment
• Reinsurance and risk transfer
Renay strongly recommended that to gain a current understanding of the top insurance risks in South Africa, we consult industry reports, local insurance market analysis, or reach out to insurance professionals or industry associations in the country. They can provide the most up-to-date and accurate information on the specific risks currently prevalent in South Africa’s insurance landscape. We must also learn from global trends. She closed off her session by emphasizing that is not a competition, we all need each other and must work collaboratively for a desired outcome.
A brief Q&A was held before everyone convened for a short comfort break and light lunch.
Bukhosi then introduced our second speaker for the day, Tash Moodley, Portfolio Manager at Terra Marine (Pty) Ltd. At 28 years old, he was the company’s youngest shareholder when it was founded in 2020. He holds a BCom degree in Finance, Investments, and Insurance from Wits, and is currently doing his Honors in Insurance at Wits. When he is not in the office, he is running half marathons or training with his dogs and his K9 search and rescue club.
Tash outlined that one of the benefits of working for a small company is that you have many roles which is one of the better ways to have a full understanding of all areas of the business. One should predict what the world looks like in 5yrs and prepare accordingly. Insurers should educate the market not just in marine but also other forms of insurance and strive to also offer specialized training.
With marine cargo insurance, the pricing model pretty much remains the same across the market. Some factors affecting the routes of ships are wars, geographical and weather effects, and political and theft trends. Theft trends are largely based on how liquid goods are, i.e., how easily it can be converted to cash. They’re also sometimes referred to ‘Robin Hood’ goods, although they’re not given to the poor but generally sold to poorer communities at a drastically reduced price. Crimes are usually driven not by standalone criminals but by sophisticated syndicates. Ships are getting bigger which means increased loads equating to larger exposure and thus a bigger problem for insurers. As our population is rapidly increasing so do demands on goods increase as well. It’s quite surprising that just a dozen people are required to move these enormous cargo ships, but as a result, firefighting teams onboard are drastically reduced. Paint rooms and kitchens on ships are the most dangerous as everything is usually flammable. Instead of water hoses, foam hoses are used for oil-based fires. Priority is life first then goods. Risk management innovations keep improving but perils like fire and flooding remain traditional. A unique method used in container fires is the hydropen which can isolate and douse a fire inside a container.
The earliest form of insurance is marine insurance born along the Guangzhou river in China. Merchants would split their goods across multiple ships so as to reduce the risk. Lloyd’s coffee house of London was also based near a harbour. An important takeaway message was that one shouldn’t be predicting and pricing the future, but we must find ways to survive the future. We must learn from our mistakes.
Tash entertained the audience with an interesting “potato test” which had everyone on their feet trying to predict outcomes of the test. This was not a science test but an insurance test with a valid message. Everyone can agree on an outcome, and it can still be the opposite result. The suggestion is that we shouldn’t rely on predictive models but on experimental models. We must study all losses around the world, not just a specific client’s losses, to determine how that risk should be underwritten or transferred.
Tash then ended his presentation with a ‘Who Wants to be A Millionaire’ styled quiz where prizes sponsored by Terra Marine were handed to the correct guesses in the audience.
Bukhosi then closed the session with a further Q&A and our IIG Head of Edu Portfolio, Tebogo Raphathelo handed out gifts to our dynamic speakers.
Article written by: Asiya Swaleh