Tourism industry operators need to be covered

South Africa’s booming tourism industry is at risk from the increasing frequency and severity of catastrophe events, Santam, South Africa’s largest short-term insurer, warned today.

 “Writing risk for the tourism and hospitality industry requires an understanding of businesses that range from small B&B’s, boutique hotels, to well renowned golf estates, game reserves, time shares and international luxury hotel groups operating in the South African tourist and accommodation market,” says John Fitzpatrick, Managing Director at Hospitality and Leisure (H&L) Underwriting Managers, Santam’s specialist underwriting agency in the hospitality sector.

Last year, Santam paid catastrophe claims of almost R400 million – more than three times the average annual catastrophe claims registered by the group over the past 12 years.

The increase in these claims came primarily from the floods in Mpumalanga in January 2012, a number of significant hail storms in Gauteng during October and November and a devastating fire at St Francis Bay in November 2012.

“An established wine estate can offer accommodation in terms of a hotel offering, entertainment in terms of golf, picnics and food at a restaurant – all of it being offered on one property but with a magnitude of risks to be managed. These operations need special protection, not only for their assets but also for their local and international visitors,” says Fitzpatrick.

“Understanding the specialised underwriting needs of our clients, being flexible to accommodate each individual request and challenge, and designing cover and specific policy wordings to meet the unique needs of brokers and clients, are the success pillars of H&L,” adds Fitzpatrick.

The National Department of Tourism has set the target to attract 15 million arrivals to South Africa by 2020, in conjunction with the aim to increase tourism’s contribution, both direct and indirectly, to the economy from the 2009 baseline of R189, 4 billion (7.9% of GDP) to R499 billion by 2020; and to create more than 225 000 new jobs in tourism.

The months from January until October 2012 showed an increase of 10, 4%, with 7 535 498 tourist arrivals compared to 6 823 517 tourist arrivals for the same period in the previous year. It is clear that the tourism and hospitality sector is an economic growth engine for South Africa, attracting investment and creating jobs. It continues to be one of the five priority sectors in the SA’s growth plan with government reviewing tourism legislation in an effort to streamline it further.

The 2013 World Economic Forum Travel and Tourism Report ranked South Africa at 17th place for its natural resources and 58th for its cultural resources, based on its many world heritage sites, rich fauna, creative industries, and the many international fairs and exhibitions held in the country on an annual basis.
For any business operating in this extensive industry, part of the formula of ensuring success includes taking special care of the potential risks that could possibly devastate the commercial viability of a business.

Risk management for businesses in the immensely diverse and dynamic tourism, hospitality and leisure sector is not an easy task. These businesses all bring unique challenges to the table and require policies tailored to suit their niched requirements.

Formed in 2008, H&L offer the most comprehensive specialist risk management product in the market catering from the smallest risk to larger capacity risks. Working specifically through registered FAIS compliant brokers, H&L attribute part of its growth to the expertise and understanding of risk offered by Santam; its shareholder and principle under writer.

One of the high risks that have devastated the sector recently has been flooding throughout most parts of the country and in surrounding countries such as Mozambique and Zimbabwe.

“Last year was especially terrible in terms of losses incurred as a result of floods. The Hoedspruit area in the Northern Province was hard hit by floods in January 2012. KZN and the Eastern Cape also suffered catastrophic flood losses towards the end of the year. The total loss affecting the hospitality industry was in the region of R600 million,” adds Fitzpatrick.

“Elements such as changing weather patterns and government regulations such as the consumer protection Act must all be factored in for clients specialising within the sector. The biggest challenge however is to underpin all the associated risk challenges for each client, ensuring that they have the correct protection is in place. Through our expertise and our comprehensive offering, we work with our FAIS registered brokers to advise clients on how best to mitigate against risk, and provide them with the best short-term cover they need,” adds Fitzpatrick.

Quinten Matthew, Executive Head of Specialist Business at Santam, says H&L fulfils the short-term insurance leader’s requirements for specialist underwriting partners.

“We look for agencies with the skills and vision to create robust, sustainable and thriving businesses. Innovation and ambition are important components of the mix. H&L has worked hard to develop good working relationships with our brokers and we are confident that the team shares our commitment to client service excellence and organic growth through delivery,” concludes Matthew.

This is an unedited statement issued by Santam


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