Hospitality sector faces insurance blow

Restaurants, B&Bs, hotels, game lodges and other such businesses are negatively affected by the insurance company scrapping cover for infectious disease claims in the hospitality industry due to Covid-19.
Restaurants, B&Bs, hotels, game lodges and other such businesses are negatively affected by the insurance company scrapping cover for infectious disease claims in the hospitality industry due to Covid-19.
Image: 123RF/ ANDREY BAYDA

One of SA's biggest insurance companies has scrapped cover for infectious disease claims in the hospitality industry as from April 24, prompting protests from some affected clients.

HIC Underwriting Managers, which underwrites commercial, industrial and hospitality insurance products, has amended its policy conditions due to the impact of Covid-19.

The hospitality industry clients, in this instance, refers to restaurants, B&Bs, hotels, game lodges and other such businesses.

In a memo to clients it said the decision was prompted by engagement with international reinsurance partners after the World Health Organisation declared a pandemic.

“We have been engaged with our partners to obtain clarity on the extent to which our reinsurance cover may or may not respond to this event,” said the memo sent out late last month.

“We have now received confirmation that they will no longer provide reinsurance cover for the infectious disease extension on the business interruption sections of our hospitality policy wordings.

“Accordingly, we regret to inform you that we hereby give you 30 days of notice of our intention to delete the notifiable disease extension under the business interruption section,” HIC said.

It is unclear how many South African businesses are affected by HIC's decision, which comes at the worst possible time for the local hospitality sector. It also comes part-way through clients' current term of insurance, prompting outrage from some of those affected.

“I am not sure if this is even legal, but it is certainly morally reprehensible,” one told Business Times this week. “After all, what is insurance there for? There are probably many establishments who, like us, pay huge sums of money to cover ourselves for various scenarios and are now in the same boat. I am going to fight this tooth and nail.”

Concerns over insurance cover for Covid-19 have made international headlines, including in the UK where the head of the Financial Conduct Authority last week cautioned insurers to comply with the regulator's guidelines.

HIC referred queries to its risk carrier, Guardrisk, which confirmed it is no longer able to provide cover for pandemic-related business interruption insurance.

“Like all insurers, Guardrisk is heavily reliant on its reinsurance panel of local and international reinsurers,” the company said.

“Essentially, the cover offered by our reinsurers determines the cover that we can extend to policyholders. Our international reinsurers have indicated they will not renew reinsurance for pandemic-related business interruption cover and therefore Guardrisk will not be able to provide this cover.

“Our response in this regard is in line with that of other leading South African insurers.”

Guardrisk said cover remains in place “subject to the conditions of the endorsement issued with regards to future cover, and the latter applies only to a handful of policies underwritten by Guardrisk”.

However, another affected client, a restaurant in Cape Town with almost 100 staff, said HIC has to date given no undertaking that it would pay out claims already submitted.

“They have said they are not prepared to give any undertaking and to date no money has been paid out,” the owner said.


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Unpacking SA's coronavirus numbers. Produced and edited by Luke Charter

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