The South African Machinery Insurance Association (SAMIA) Chairman’s Report 2009
As this is my first Chairman’s report, a sincere thanks to Francois Engels, the outgoing Chairman for all his support during the handover period.
The Market
The year 2008 saw an economic slowdown, witnessed by the number of construction projects that were cancelled or put on hold, noticeably in the mining industry. Far fewer new, large projects were initiated, and the power shortages impacted heavily on the industries with bigger power demands.
The Rapid Rail Link Project (Gautrain) is running on schedule as are the various 2010 FIFA Football World Cup projects that include the stadiums and airport upgrades.
The engineering market figures as collected by SAIA for 2007 reflect a 24% growth over 2006 (similar growth to the previous year). The overall gross premium income for 2007 was R1, 695 billion versus a gross premium income of R1.366 billion in 2006. Total claims for 2007 were R606.7 million (an increase of 21.9% over 2006) resulting in an impressive loss ratio of 36%. The most active and highest growth class was the construction sector with premium growing from R462.9 million in 2006 to R630.5 million in 2007 (a 34% increase). Losses in this segment amounted to R196.5 million, arriving at a loss ratio of 31% for this sector.
Training
In May 2008, SAMIA hosted a highly successful and well-attended training course on construction and plant insurance. Due to the popularity of this training, two courses (Intermediate and Advanced) will be offered during 2009. Interesting topics were presented during the year, one by Jim Connolly on the Insurance of Furnaces and another by Brian Thompson (courtesy of Glenrand MIB) on the progress of the Gautrain project.
Topics under discussion
Topics that are currently under discussion or investigation by the committee include: plant operator skills concerns, the theft of construction plant, the difficulty in obtaining spares/replacement parts from machine manufacturers, escalation and the declaration of final premium on construction projects, as well as succession planning in the industry.
IMIA conference
I represented SAMIA at the International Machinery Insurers’ Association (IMIA) conference held in Gleneagles, Scotland, in September 2008. Knowledge transfer and information sharing are key objectives of IMIA and this was reiterated by the diversity of topics presented at the conference. Papers presented included:
- Contingent Business Interruption (BI) in Engineering Insurance
- Deregulated Electricity Markets and how it relates to Engineering Insurance Business Interruption (BI) exposures in the construction and operation of power generation plants
- Desalination Plants – the technological development, claims experience and the risks affecting engineering insurers
- CO2 Free Coal Combustion Technology and its effect on insurance
- Heathrow – Terminal 5, Bridges – Construction
- Insurance and Risk Management
- Liquidated Damages Insurance with reference to projects such as Wembley Stadium
Further breakaway discussions were held and the following topics were discussed:
- Influence of computer controls on machinery and related claims
- Cover of “soft costs” in Electronic All Risks (EAR)/Construction All Risks (CAR) policies
- Project Insurance: Adjustment of final contract value
- Theft of construction material and availability of (used or new) power generation equipment
More details on the papers presented are available on the IMIA website.
Social Committee
All work and no play is not healthy and the social committee ensured that the industry golf day held at Killarney Golf Club during August was enjoyed by all. It was indeed wonderful to see some of the pensioners attending the Christmas Luncheon and we do hope to see them again next year.
Thank You
A sincere note of gratitude to the committee members for their dedication and assistance during the year, I look forward, with anticipation to a highly successful 2009.
Trevor Kerst
Chairperson: SAMIA
