Social Unrest: A South African Perspective

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Social Unrest: A South African Perspective

Published 14 March 2022

Social unrest and political violence may erupt with little warning across the globe.  In Africa’s case, perhaps more markedly than in other regions, outbreaks tend to be influenced by the political ideology of the government or the political party in power at the relevant time.  Consequently, for any enterprise engaged in, or looking to engage in, Africa (whether as insured or (re)insurer), it is crucial to undertake due diligence of the social and political temperature on the ground and to know what, if any, State support is in place if things go wrong.  While the majority of African countries do not have a dedicated State-backed system in place to support victims of social unrest, South Africa is an exception.  Here, we analyse the events of July 2021 and highlight the importance of the role played by the State-backed insurer for such incidents

In July 2021, the imprisonment of former South African president Jacob Zuma for contempt of court served as a catalyst for more than a week of widespread rioting, looting and arson in parts of the country. While the unrest may have been initiated by the former president’s supporters, as with outbreaks of unrest seen across the globe in recent times, this was just the trigger for protests at deep-rooted grievances. It soon became evident that the conflict was being fuelled by other complex issues, including frustration at high unemployment and the economic effects of the COVID-19 pandemic. Thousands of businesses were destroyed and over 300 people reported killed as looters and arsonists raided shopping centres, business parks, warehouses, factories and street-facing stores.

Understanding the market

The history of the insurance market in South Africa is crucial to understanding the impact of civil unrest on the local market and the international reinsurance market. During the Apartheid system that upheld segregationist policies against non-white citizens and operated from 1948 until the early 90’s, the country saw a number of protests, riots and politically motivated acts of civil unrest. Until 1979, insurance cover for riots, strikes and malicious damage to property was only available through the traditional insurance market. During the mid-1970’s, the unrest and violence in the country intensified due to a surge in politically motivated acts, resulting in increased incidents of damage to property.  

Following the 1976 Soweto students uprising, the local insurance market was unwilling to settle claims as the losses were considered to be caused by political actions.  To compound matters, the losses were significant and the market realised it could no longer underwrite them. This created a demand for an insurer that was willing to accept losses from politically motivated acts. In an effort to rectify the situation, the Government along with the South African Insurance Association (SAIA) agreed to establish an insurer specifically to provide cover for those losses that the local market no longer covered. In 1979, the South African Special Risks Insurance Association (SASRIA), a non-profit company, was formed.  

SASRIA was initially overseen by SAIA, with the South African government being the insurer of last resort with unlimited liability. The objectives of SASRIA were to protect assets against politically motivated acts, terrorism and political riots. In 1989 its scope was expanded to include damage to property caused by non-political riots, strike and labour disturbances. In 1998 the government withdrew its unlimited guarantee and limited it to R1bn. In 1999, SASRIA was converted to a limited company and became, and remains, wholly owned by the South African government.


Typically, policyholders now purchase SASRIA’s special risk insurance through brokers or directly from registered insurance companies, which include SASRIA’s special risk cover in their policies as an add-on. This special risk insurance provides primary cover for up to ZAR500 million (approx. £25M) but policyholders looking for more extensive cover can increase their cover to ZAR1 billion (approx. £50M). Policyholders wishing to insure themselves in excess of the cover provided by SASRIA can purchase cover in the Lloyd’s market under what is known as a SASRIA wrap.

Beyond its own reserves, SASRIA is protected by a layer of reinsurance through global reinsurers such as Swiss Re and SCOR. In the event of SASRIA having to pay out on claims that have depleted its own reserves as well as the layer of reinsurance, it would have to look to the South African government for a further injection of funds.

July 2021 unrest

In relation to the July 2021 unrest, SASRIA agreed to pay all losses relating to the overall unrest, provided those affected had SASRIA cover. SASRIA gave local insurance companies mandates to settle claims up to ZAR1M for individual businesses and for ZAR500,000 in respect of domestic claims. Local insurers settled these losses and then claimed back from SASRIA. As a result, the local market was responsible for appointing loss adjusters who made recommendations as to quantum. The only losses not addressed by the conventional insurers were business interruption claims, which were handled directly by SASRIA.

The total losses from the unrest are estimated in the region of ZAR20bn – ZARR30bn (£1bn -£1.5bn). Although SASRIA recently announced that it is well capitalised and has adequate reinsurance programmes to provide for the anticipated exposure, its estimated cash reserves amount to ZAR2bn, along with non-liquid assets of around R7bn. There is reinsurance available, but it is not known how this is structured.

SASRIA has responded by increasing its rates with effect from 1 October 2021. However, since the local market is not directly impacted, the immediate effect of the increase is likely to be largely confined to SASRIA and the few local insurers that offer wrap-around SASRIA cover.

Given the recent spate of social unrest in South Africa, there is the likelihood that local insurers will also face tougher scrutiny when reinsurance programmes are negotiated, which  could lead to a hardening of the market.

Will others follow?

Looking forward, a key issue is whether other African countries will emulate South Africa and create a similar state-backed political insurer like SASRIA.  However, given the significant costs involved and the relatively weak financial position of most of the countries that are affected by social unrests, this is perhaps unlikely. This means that most African governments are likely to continue to offer ad hoc funds (if at all) to compensate uninsured individuals and businesses who suffer losses as a result of social unrests.  Consequently, for any company or (re)insurer operating within such jurisdictions, and given the increasing spate of unrests across the continent, it is prudent to give careful consideration to the wordings of insurance cover to ensure that such risks are either covered or excluded as appropriate.


Olu Dansu – Partner, Head of Africa Group at DAC Beachcroft LLP

Brett Randles – Associate (South African Qualified) at DAC Beachcroft LLP

Key Contacts

Brett Randles

Brett Randles

+44 (0) 20 7894 6377