Flood Damage Affects Short Term Insurance

March 9 - South African short term insurance groups said that they would not raise premiums based on the damage created by summer rains and flooding in the Vaal River area.

Although the flooding would have an affect on short term insurance groups' performance in the first half of 2010, industry analysts believe that these groups are able to absorb the losses.

"Natural disasters like these are few and far between and an increase in claims as a result of these incidents is a once-off knock the companies can take," said a senior analyst at Imara SP Reid, Steve Meintjes.

Nevertheless, insurance companies have reported a record number of claims due to damage caused by the floods, as well as stormy weather such as lightening.

"This increase in claims has broken all records," noted Danny Joffe of Hollard Select Brokers. "But we are not going to raise premiums. We will have to bite the bullet. Natural phenomena like floods are not common."

Santam, one of the companies dealing with the damage, in the meantime released its 2009 statistics to show a profit attributable to equity holders of R1.08 billion for the year ending December 31st.

Net income for the group grew by 16% to R14.29 billion in 2009 - up from R12.28 billion in 2008.

Better returns on Santam's investment portfolio boosted profits, thanks to a major recovery in world financial markets.

Santam said that its underwriting margins were still under pressure and they expected this trend to continue due to softer demand as consumers fight tough economic times.