Understanding Sasria cover

Great news for Safire Crop Protection Co-operative clients who suffered losses to their sugar cane crop during the July riots: their sugar cane claims have been quantified, submitted and paid in full by Sasria, including any loss in RV (recoverable value).

This was largely due to the prompt collection and submission of all relevant information and substantiating documentation to Sasria by the Safire Co-op team, who worked tirelessly behind the scenes to ensure speedy processing of the claims.

The protection offered to both private individuals and companies by Sasria’s special risk insurance has been in the spotlight since the July unrest. “Sasria fire cover is automatically included for all Safire Co-op certificate holders,” says Ruth Bezuidenhout, General Manager of Safire Crop Protection Co-op. “Sasria provides peace of mind at a nominal cost, and is definitely an indispensible part of any farmer’s insurance cover.”

This was all too clearly confirmed by the widespread damage that was caused during the looting and vandalism in July this year. An estimated 135 222 tons of damaged cane worth almost R84.5 million was rejected by KZN mills, which were also impacted by the unrest, losing a week or more of production, and adding to the overall loss to the industry.

Sasria SOC Ltd (FSP no: 39117) is a non-life insurer, wholly owned by the State, that provides special risk cover to all individuals and businesses that own assets in South Africa, as well as government entities. South Africa is one of the few countries in the world that provides this insurance, particularly at an affordable rate. Many sugar cane growers sign up for Sasria cover in the expectation that they will be totally covered in the event of damage caused during a period of civil unrest.

However, there are some instances when Sasria cover will not apply. For example, the physical loss or damage to property must be directly related to a Sasria peril. Consequential and indirect losses are not covered. According to Sasria, “Sasria does not compensate you for: loss or damage caused by prevention of access (for example, deterioration of stock or perishables)”.

This exclusion had a major impact on KZN sugar cane farmers affected by the July unrest. In addition to legitimately harvested cane from controlled burning prior to the unrest, over 500 000 tons were burned during the protest actions. The farmers who had burned prior to the unrest were not able to get their burnt cane to mills for various reasons, which included road closures, unrest en route or near to the mills, staff not being able to get to work at the mills, restrictions on movement by trucks and staff, and fuel shortages, resulting in this cane having to be dumped.

“Not many sugar cane farmers know that this ‘prevention of access’ exclusion is potentially a gap in cover that could result in major unplanned expenses,” says Ruth. “Another unforeseeable consequence was that the mills were unable to deliver their milled cane to the storage facility in Durban, limiting their ability to take in any further burnt sugar cane, whether prior to the July unrest or as a result of it. This situation was only rectified once a large amount of the sugar cane had deteriorated (which Sasria does not cover), and was not able to be processed. This resulted in no financial recovery from Insurers or Sasria.”

Bearing this in mind, it is important to understand the impact that such an event may have on the capacity of a sugar mill. In the case of smaller fire events, there is often a good chance that the farmer will still have a reasonable recovery as long as the cane can be delivered to the mill within a day or two. However, this may not be the case when large areas are affected by fire in a very short period of time, impacting the mill’s capacity: the longer it takes for cane to be milled, the lower the ‘recoverable value’, which is based on the estimated amount of sugar that can be retrieved from the cane.

Sugar cane fire insurance is designed to provide cover for losses from uncontrolled fires or spread of fire from a controlled burn and does not cover cane that has been burned for harvesting purposes and then is not deliverable.

Understanding what cover is provided by one’s insurance is vital. Research indicates that around 70% of the country’s farmers are not insuring their crops and only 8% are insuring their farming-related assets. Note that Sasria cover needs to be renewed annually.

Another factor that affected sugar cane growers was the issue of disposal – the cane has to be dumped in a contained area to prevent the potential spread of the destructive Eldana saccharina or African sugar cane borer, a stem-borer endemic to sub-Saharan Africa that is one of the most harmful pests affecting sugar cane. The dumped burnt cane could have become a breeding ground for this insect.

For the many individuals and businesses severely affected by the July riots, it is a hard-earned lesson: understand the details of the insurance cover you sign up for, and ask your broker to explain if you are unsure.