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Relief to contingent business interruption policyholders
SANTAM LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1918/001680/06
JSE Share Code: SNT & ISIN: ZAE000093779
NSX share code: SNM
Debt company code: BISAN
(‘Santam’ or the ‘Company’ or the ‘Santam Group’)
RELIEF TO CONTINGENT BUSINESS INTERRUPTION POLICYHOLDERS
Shareholders and noteholders are referred to the Business Interruption Claims update released on
SENS by the Company on 7 July 2020. While there remains material uncertainty regarding contingent
business interruption policy claims against Santam, the Company wishes to provide further detail on
current developments and relief payments to be made available to policyholders who have the
Contingent Business Interruption (CBI) extension.
Santam’s position with respect to policies containing the CBI extension for contagious and infectious
diseases is that a policyholder’s loss must be due to a peril insured in the policy contract. This requires
that any interruption of an insured’s business must be directly attributable to a localised COVID-19
infection, which is the peril insured under our policies, and not for any other reason, such as the
national lockdown or other international response, which are not insured perils. This view is in line
with the majority of our counterparts and reinsurers in the non-life insurance industry, both locally
and globally.
A recent South African court ruling on another insurance company’s policy wording found the insurer
liable to indemnify the insured in terms of the business interruption section of the relevant policy for
any loss suffered since 27 March 2020 as a result of the COVID-19 outbreak in South Africa. Santam
holds a firm view that the national lockdown is not an insured peril covered under our policies. Santam
is confident that the arguments filed in its case, set down for 1 September 2020 before a full bench of
judges in the Western Cape High Court, will comprehensively deal with the pertinent insurance issues
that need to be addressed by the court.
It is important to note that Santam’s reinsurance program will only respond to claims covered under
the terms of our policies. In order to formulate a reinsurance claim under a different interpretation of
the policy wording to our own, such interpretation would have to be definitively decided by the South
African Courts. This highlights the critical need for legal certainty on policy response.
Santam however realises that the court cases on the interpretation of the policy wording may be
lengthy. We recognise that these are extremely difficult times for businesses and we are determined
to assist our policyholders. We will therefore provide up to R1 billion of relief payments to support
mainly our small and medium sized commercial policyholders in the hospitality, leisure and non-
essential retail services industries that have the CBI extension and suffered a loss due to the national
lockdown. Large corporate clients are excluded due to the bespoke and complex nature of insurance
policies for such businesses. This will be in the form of a relief payment to support our policyholders
who are in financial distress and not an indemnity payment under a policy contract, as the scope of
the cover still needs to be determined by the South African courts. Policyholders will be required to
register a claim in order to qualify for the relief. Santam will commence the relief payments from the
first week of August 2020.
The R1 billion relief equates to 70% of two months’ value of the sum insured for Santam’s
policyholders in the identified industries. The two months are indicative of the period where most
businesses were impacted by the restrictive trading environment imposed by the Level 4 and 5
lockdown in South Africa. The 70% is based on a view that the businesses would have experienced
variable expense savings during the lockdown. The relief payments will be set at a minimum of R25
000 and a maximum of R1.5 million for individual CBI policyholders.
Should the Courts ultimately rule in Santam’s favour and determine that the lockdown is not an
insured peril, then the amount paid will still be considered relief payments in respect of registered
claims to policyholders and will not be recovered from policyholders. However, in the event that the
courts rule against Santam and determine that the national lockdown is an insured peril, the amount
will become an advance payment against any finally determined claims against Santam under the CBI
extension.
Santam has engaged extensively with the Financial Sector Conduct Authority (FSCA). The FSCA
confirmed that it considered Santam’s proposed relief payment fair towards its policyholders. The
FSCA also acknowledges the importance of obtaining legal certainty from the Courts.
We will continue to update the market on our COVID-19 related exposures as more information
becomes available.
27 July 2020
Cape Town
Sponsor: Investec Bank Limited
Debt Sponsor: Rand Merchant Bank (a division of FirstRand Bank Limited)
Date: 27-07-2020 07:10:00
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