OUTsurance & Youi flood losses all covered under reinsurance: RMI

Flood losses suffered by two insurance brands owned by Rand Merchant Investment Holdings, the South African based financial services investment holding company, are all expected to be covered by the reinsurance programs of subsidiaries OUTsurance and Youi, the company has said.

OUTsurance operates in South Africa, while Youi operates in Australia and for both it has been flooding that triggered their catastrophe reinsurance arrangements in over the last year.

In an update to the markets, Rand Merchant Investment Holdings (RMI) explained that both of its insurance subsidiaries had adequate reinsurance in place to absorb their losses from flooding in their respective countries of operation.

OUTsurance was badly affected after flooding in the Kwazulu-Natal province of South Africa.

The flooding in April 2022 caused extensive damage to coastal and inland areas in the province, following which OUTsurance has estimated a gross exposure of between R400 million to R450 million (roughly US $25m to $29m).

While 90% of the insurance claims from the floods in Kwazulu-Natal have been assessed and 60% of them settled, RMI cautioned that “Estimation uncertainty is high as a result of the magnitude of the event and the potential of inflationary developments.”

Despite this, the company feels that “the gross exposure is well within the cover provided for by OUTsurance’s catastrophe reinsurance programme.”

The insurers catastrophe excess of loss reinsurance attaches for loss events in excess of R50 million and OUTsurance is also required to pay additional reinsurance reinstatement premiums, on top of its retention.

As a result, RMI estimates the net loss to it from the Kwazulu-Natal flooding will be between R160 million and R200 million.

Youi in Australia, meanwhile, suffered losses after the Queensland and New South Wales flooding during February and March 2022.

RMI said it has defined the Australian 2022 floods as three individual events, under the terms of Youi’s reinsurance programme, leading to a retained net loss of A$6 million in the aggregate.

The estimated gross ultimate loss across these three events is the largest in Youi’s history, the company explained, pegging it at an estimated A$140 million.

“This exposure is adequately covered by Youi’s catastrophe excess of loss and natural perils aggregate reinsurance programmes,” RMI said.

“The above average rainfall patterns experienced in both South Africa and Australia over the course of the financial year to date continue to impact overall claims experience,” RMI commented.

Again, inflation is mentioned, as RMI cautioned that, “Higher claims inflation continues to put upward pressure on ultimate claims cost.”