FORMATIVE ASSESSMENT 1 [100 Marks) THE RISKS OF RIOTS AND CIVIL UNREST From January 2013 to 9 February 2014. South Africa recorded a staggering 430 service delivery protests - an average of 33 per month or one per day, according to the Institute for Security Studies. Gauteng leads by a massive margin in terms of violent protests, followed by KwaZulu-Natal and Limpopo. At least 10 people have died during such protects, and both government and private property have been seriously damaged with protesters setting fire to government buildings, private properties, homes of government officials and vehicles caught in the fray. Standard insurance policies available through private sector insurers do not provide cover for damage to assets as a result of these types of events as they are precluded from underwriting these risks. Cover is available in South Africa through the state-owned insurer - Sasria SOC Limited. Sasria, which was originally founded to provide cover for politically motivated riots, covers damage caused by riot (both political and non-political), public disorder, including labour disturbances, civil unrest, strikes and lockouts. It is the only organisation in South Africa authorised to provide insurance cover for losses caused as a result of these types of events. According to Sasria's 2013 annual report, its claims frequency increased by 91% driven primarily by labour strikes, while claims severity increased by 135% compared with 2012. Sasria's importance seems clearer than ever as the uncertainties in the socio-economic environment mean that 'special risks' as defined in Sasria's terms of reference, have become a permanent part of the risk management landscape as the challenges of industrial action, workplace disruption, social unrest and service delivery protests proliferate. Both businesses and consumers need to consult with their brokers and insurers to ascertain whether their insurance coverage has been extended to cover Sasria perils. As a matter of course, clients should be offered this type of cover when discussing their business personal insurance requirements as this presents a significant risk to both consumers and business owners who could find themselves severely out of pocket if their assets were damaged during a violent strike. Given the status quo of the last 12-18 months, it's an essential if not non-negotiable cover on any insurance policy. This is especially important for people who own property, live, work or commute in areas that have a high propensity for protest and strike action. Sasria may not decline your request for cover. Sasria rates are regulated and for businesses available to the premiums. However, cover provided by Sasria is subject to a maximum limit for any one loss and any one insurance period per client to R1,500 million. The Sasria cover in terms of Business Interruption is limited to fixed expenses or standing charges and net profit, but not for the traditional contingent business interruption covers such as losses following damage to premises of customers and suppliers, and to the supply of public utilities. These covers can be purchased from the private sector to ensure the client enjoys similar cover to that provided for losses arising from non-Sasria perils. For consumers, the cost of cover is minimal in relation to that of replacing an expensive asset. Experience has shown that strikes and protest action in South Africa are becoming increasingly violent and it is therefore crucial to ensure that the insurance cover is correctly structured so that clients do not suffer unnecessarily as a result of damage to their property. Source: Graeme Fuller, https://cover.co.za/the-risk-of-riots/ Answer ALL the questions in this section. Question 1 (25 Marks) In light of the case study provided, justify the importance of Sasria SOC Ltd to the insurance industry and the South African economy Question 2 (25 Marks) Experience has shown that strikes and protest action in South Africa are becoming increasingly violent and have resulted in significant disruptions to enterprise-wide risks. Considering this, advise South African businesses on how they should manage enterprise risks Question 3 (25 Marks) With refence to South African businesses evaluate the measures that they can consider in financing the extent of damages and costs caused by civil unrest and riots. Your response should refer to relevant examples and illustrations.