Closed for two weeks. One Huguenot Tunnel. Who pays?

1. Have a radius limit (damage must occur in the vicinity of the premises, often within 20km).

2. May be limited to an insured peril operating, like fire or flood affecting access.

3  Losses are capped to a predetermined time period.

4  Have a monetary sub-limit.

Lessons from previous disasters

I recall when Chapman’s Peak closed for three years back in 2000. Three years: in South Africa, that is two elections, a few cabinet reshuffles and at least one new Eskom CEO. This closure caused some businesses to collapse, as this event was not insurable since there was no insured physical damage to insured assets

Another example occurred during the 2022  KZN floods, when large insurers like  Tokio  Marine paid claims and then sued local authorities for  R6.5  billion, alleging poor maintenance. There is a lesson. Subrogation only works when your insurance pays first. Without that initial payout, you carry this catastrophic cost alone.

Contingent business interruption

Contingent business interruption (CBI) insurance exists for scenarios, like the tunnel, where damage occurs to facilities or utilities you depend on, but do not own, that then cause a reduction to your turnover.

Few South African firms include it, usually because it either costs more, is not explained properly or is not offered to clients at risk analysis stage. Some CBI extensions may also be time capped, some to 90  days or possibly, even shorter periods.

Any risk adviser worth their salt will always encourage their clients to insure CBI extensions to the full extent of what is offered by the SA insurance market, as no one has a crystal ball – who knows when and where the next Huguenot Tunnel will be?

Steps worth taking:

1. Map dependencies. Identify roads, ports, suppliers and utilities that underpin your business.
2. Ask direct questions. What happens to cover if the N1 shuts for a month? If Durban  Port closes again? If a main power substation near is damaged
3. Take the widest business interruption cover. Do a proper risk analysis with a professional, extend radius limits, and check sub-limits and sums insured.

In closing

Keep in mind, that when insurers pay, they will invariably pursue negligent entities through litigation for the legal recovery of their financial outlay. Without a valid liability claim, these entities are stuck funding lawsuits and onerous financial judgments made by our courts.

Infrastructure failures will keep happening. South Africa’s maintenance backlog exceeds  R420  billion. Climate and other emerging risks are not slowing down. Huguenot’s closure hurt for two weeks or so and then reopened, smooth as ever. South Africans sighed, smiled and hit the road. Same bakkies, same potholes, same patience. We moan, we fix, we braai.