More local risks are becoming a severe problem for insurers, and the withdrawal of cover for pandemics in 2020, as well as that for grid failure earlier this year, may only be the beginning. During a meeting on sustainable insurance with the Financial Sector Conduct Authority (FSCA) and specialist development agency, FSD Africa, on Monday, members of the insurance industry said some risks are becoming "systemic", meaning the risk is bigger than the private sector can handle. "Nobody wants to reach a place where insurance cover is just withdrawn. But sometimes it is going to happen," South African Insurance Association (SAIA) CEO Viviene Pearson said. She said the industry's decision to withdraw cover for grid failure was one example of insurers trying to protect their sustainability while they have to pay record claims because of weather-related events and power surge claims because of load shedding, among other crises. Because of the possible financial impact of grid failure claims, the industry would have to substantially hike premiums to the point that insurance would not be affordable for most people. "There's absolutely no way that the insurance industry can withstand such an event," she said. The state-owned South African Special Risk Insurance Association (Sasria) also wanted to scrap cover in the event of grid failure, but later withdrew its circular due to complaints over the notice period. Even for power surge claims, insurers have begun putting benefit limits or increasing excesses payable to keep premiums affordable.

Riots and floods Pearson said the affordability of property insurance in flood-prone areas is already becoming a problem. But she added that the industry has a responsibility to look for ways to mitigate the flood risks and create alternative products where necessary, rather than just giving up.Sanlam's chief sustainability officer Abel Sakhau says this is why its subsidiary Santam is working with more municipalities to develop climate change response plans and provide disaster management equipment where necessary. The executive head of non-life reinsurance at Munich Re, Walter Voigts-von Forster, said the industry withdraws cover as the last resort to protect its sustainability. Insurers and reinsurers first try to find ways to lessen the financial impact of the risk on their books. As for natural catastrophes like floods, Voigts-von Forster said the industry is finding ways to mitigate the risk and, therefore, still has the appetite for covering them. "There might be ways of making the insurability easier in terms of how we structure policies. Anything that results from natural catastrophes is and should be coverable. The concerning thing, though, is the growing frequency of high-severity events," he said. The escalating social risks especially after the July 2021 riots also concern the industry. "Some of these risks are becoming systemic and potentially uninsurable," said Pearson. Sasria covered the damage caused by those riots. But Pearson believes that SA needs a better way to manage this social instability because non-life insurance bears the brunt for everything happening in the country. Escalating crime, bad municipal drainage infrastructure, riots, and load shedding all cause a spike in claims. "The non-life insurance industry cannot be sustainable if the whole environment is not sustainable. But there must be something that we can do to mitigate against the risks or adapt to these risks so that we can reduce the exposure," she added.

Momentum's new CEO designate Jeanette Marais has been central in the formation and execution of Momentum's and Metropolitan Holdings's (MMH) last two strategies, which helped the insurer claw back some lost market share.Marais, who will succeed Hillie Meyer in August, says she knows that the political climate, a stagnant economy and rising interest rates aren't going to work in her favour. But she has "an overwhelming sense of responsibility" to maintain consistent financial performance despite the gloomy outlook for the insurance sector. "The market is not going to give it to us. Politics and the economic environment are not going to give it to us. It's going to be up to every person in this organisation to pull our weight standing together," said Marais.She said that when she left Momentum to join Stanlib and later Old Mutual, the former was "the most formidable" competitor for her team. But in the later years, Momentum "just faded". "So, second place is not a place for me. This brilliant business needs to play in the A league," she said. In her first year back at MMH, Marais' diagnosis of the insurer's core problem was that the team was too internally focused. Tasked with bedding down one of the biggest mergers in SA's life insurance industry, MMH became too complex. Abolishing what remains of this complexity is her top priority while keeping the financial performance pleasing to investors. Marais has the luxury to see through the current strategy until June 2024. But investors will be keenly watching how she'll make her blueprint come July 2024. She said that with the help of her team, she has already started crafting their 2027 strategy. That strategy must show some out-of-the-box thinking on how MMH plans to shine in the longer term. The past two strategies prepared in Marais' presence were more about stabilising the business. "We didn't always have the luxury to start thinking about a purpose that binds us together. We needed to make sure that the market could at least just give us a chance again or at least be believable. You know, I think we've gained that back. For me, the next level is an intense focus on our clients. Our clients are struggling. It's tough out there," she said. Marais wants every interaction MMH has with consumers to set the insurer apart from its competitors. She knows that winning market share in the current climate will be a steep climb. Marais estimated that to get just one percentage point more market share in SA's insurance and investments sectors, a company needs to grow its new business by 10%. She said most insurers don't expect double-digit growth in the next three years. Marais said: I think the companies who will make it are companies who will be able to just maintain their fortunes or earnings. But I think anyone who knows me will know that there will be hard delivery, hard-driven targets.Marais said she feels an "overwhelming" sense of responsibility to bring back Momentum to its former glory in the bigger group it finds itself now. She said she's felt that sense of duty since the MMH board asked her and Meyer to return in 2018. "It doesn't happen often in one's career that an organisation that you left 18 years ago asks you to come back. But to be asked to come back means that this organisation saw something in you when you were very young," she said. So, in the last five years, she chose to be the coal face of what advisors and other operational staff do by overseeing six businesses, including Momentum Investments, Momentum Distribution Services, Consult by Momentum and Momentum Money. When MMH changed its strategy from "Reset and Grow" to "Reinvent and Grow", she had to ensure it filtered to her subordinates on the ground. "I was at the coal face of delivering on the strategy with my teams over the last five years. And when I look back, we managed to deliver on every single target we'd set for ourselves," said Marais.

You are an insurance industry analyst. How will you advise a potential client regarding the development of a business level strategy (generic strategy) based on an analysis of the macro external environment. In your advice consider and address disruptive innovation, strategic and operational complexity and globalisation. Indicate in your strategy what the organisation will do and will not do based on the strategic pathway suggested.