The 3.4 magnitude tremor that hit Oudtshoorn last week has highlighted the major issue whether the local insurance industry is prepared to cover massive losses and damage as a result of earthquakes. This is according to Dawie Loots, CEO of MUA Insurance Acceptances.
Loots says there have been a number of minor tremors in the country over the past few years and this urged the insurance industry to review policy wordings in order to effectively prepare for large scale disasters.
“While it has yet to be proven that earthquakes are related to climate change, insurance and reinsurance companies have been among the first companies to start feeling the effects of natural disasters in the form of increased payouts related to severe weather events like floods and storms,” he says.
Seismology experts say South Africa’s potential for earthquake damage comes in the form of natural seismic activity, mining-related events from deep underground mining, as well as earthquakes that occur outside our borders but are nevertheless strong enough to create some kind of effect.
Due to the fact that South Africa is not a country with a recent history of extreme natural disasters, we have become somewhat relaxed about disaster risks, let alone the possibility of loss accumulation like a simultaneous earthquake and a tsunami, which happened in Japan in 2011, he explains.
“While the risks facing South African are certainly not as significant as a number of other regions in the world, the insurance industry is aware of earthquake risk and has factored it into premiums,” concludes Loots.