IIG News

Demystifying Business Interruption – Risks and Opportunities for (Re)insurers. BI, CBI, NDBI, NDCBI, PD triggered BI – what do they all mean and how do they differ?

From a very chilly Johannesburg, we were warmly welcomed by IIG President Thabo Twalo. Thabo briefly touched on the previous Swiss Re discussion on ‘Stagflation’ and the impact on the current economy and thereafter introduced the topic for discussion as well as Swiss Re’s esteemed panelists.

The first speaker, Na’eem Davis is a Short-term Insurance, Finance, and Investment actuary with a BCom Honours in Actuarial Science from the University of Cape Town. He began his professional career at Swiss Re in 2019 as a Market Underwriter responsible for Swiss Re’s reinsurance strategy, treaty relationships and underwriting in Angola and Mozambique.  As the Property Treaty Underwriter for South Africa, Na’eem manages and steers the South African Property Treaty Portfolio and assists clients in optimising capital through structuring solvency solutions. He is part of various Group initiatives including Data & Digital Transformation, Sustainability and IFRS17.


Na’eem provided a high-leveled overview of business risks and broke it down into two basic categories:

  • Pure Fortuitous Risks – Risks affecting business operations and performance that the business owner has virtually no control over.
  • Examples:
  • Earthquake damaging business property
  • Fire or explosion in the storeroom
  • Object falling and injuring a key employee


  • Pure Entrepreneurial Risks – Risks affecting business operations and performance that are largely in control of the organisation and are accepted by the owner/investors.
  • Examples:
  • Unattractive product or service
  • Inappropriate business location
  • Failing to deliver on contractual promise

Na’eem further elaborated on the business interruption covers and extensions (historically) available in the South African market.

The second speaker for the day, Hayley Schell, who began working in the insurance industry in 1991 is an experienced Personal Lines and Professional Indemnity Underwriter. Hayley has been active in the reinsurance industry since 1994 fulling roles of treaty underwriter, reinsurance manager and reinsurance broker. She has served on the Board of an insurance company and in her position as Technical Director accumulated valuable insight into the day-to-day challenges the industry faces. She is passionate about driving strategic thinking to optimise the reinsurance transaction process. She has a Bachelor of Art in Education and is a Fellow of the Insurance Institute of South Africa. Hayley spent 8 years sessional senior lecturer in the Faculty of Finance and Economics at the University of the Witwatersrand where she taught, the Introduction to Reinsurance.


  • Hayley’s discussion centred around the landmark Thai floods of 2011, which have proved to be the costliest floods on record, with the ultimate lesson being that ma cannot outsmart nature. Much of the damage was incurred on the automotive industry which was moved to Thailand. The scale of loss shocked the insurance world with supply chains becoming severely impaired. The initial premiums were hopelessly inadequate and 90% of the losses were passed to the global insurance market. The claims settlement process became extremely complex. This event resulted in an economic loss of USD50bn, an insured loss of USD15bn (USD18bn today), with a loss ratio of a whopping 3200%.

Some of the Key lessons for re-insurers were:

  • Complex claim settlement process
  • Compound aggregation of exposure
  • Many unknowns and difficulty in underwriting
  • Information collection and understanding CBI became crucial. Do underwriters consider inter-connectedness of suppliers, do they even know who they are?

Hayley also highlighted the recent floods in the small town of Durban, Kwazulu-Natal which resulted in a R30 billion flood loss.

Na’eem, then echoed the sentiment that the Thai floods were significant in non-damage triggers, thereby pushing the limits of insurability.

He then outlined some of the Actuarial Insurability Criteria:

  • Independence of risk events
  • Moral hazards & anti-selection eliminated
  • Sufficient statistical data available to estimate frequency & severity
  • Claims paid correlated with financial loss incurred

It’s important to note that most insurance products are more than 50yrs old and with emerging risks such as cyber-crime, we need to have sufficient statistical data to correctly underwrite the risk.

BI covers need to be tailored to specific risks that can and have been underwritten and therefore, cannot be “all risk” covers. In conclusion, Na’eem emphasized that it’s important to note that if you cannot price it, you should not offer it, and must resist temptation to offer the cover just because one’s competitors do. Hayley also added that, unless there’s a physical damage proviso, there cannot be BI cover as there’s a fine line between treating customers fairly (TCF) and preserving the balance sheet of insurers.

Thabo closed the session with a brief Q&A session.

Article written by: Asiya Swaleh