Private wealth held on the continent will rise by 38% over the next decade, with many families investing in offshore real estate to diversify their asset portfolios, according to the Africa Wealth Report 2022 by Henley Global.
Tarina Vlok, MD of Elite Risk Acceptances, a subsidiary of Old Mutual Insure, said that against this background, high net worth individuals (HNWIs) need to rethink their insurance.
Insuring assets locally and abroad
Vlok said: “HNWIs to look for local insurance brokers that have knowledge of the country in which their assets are located due to the vagaries of the insurance laws in different jurisdictions.”
It’s also important for HNWIs to insure assets in a different country if their children are studying abroad.
“Remember that you cannot add foreign assets to your South African insurance policy. All risks cover is designed to protect the people's items of people if leave the country temporarily for a business trip or holiday,” Vlok said.
Property insurance
Another wealth trend is semigration, where HNWIs move to coastal towns like the Whale and West Coasts as well as the Garden Route.
Vlok said: “There is often a big premium to pay on properties in these areas, so it is best to insure homes at replacement rather than market value. If you are moving to a remote area, remember to choose an insurer who has suppliers that has the capacity to repair or replace assets in remote areas.”
Insurance for expensive assets
According to Vlok, HNWIs must also appreciate the potential limitations after loss or damage to their expensive and often rare items.
“It may seem simple to insure your R1 million watch or R4 million exotic vehicle, but it can be almost impossible to replace some of these items like-for-like, especially given the current world economy’s supply chain shortages and disruptions,” Vlok said.
HNWIs generally prefer the replacement of their items over a cash settlement, but that is not always possible.
“Consider choosing a specialist insurer who are aware of the complexities around the replacement or repair of luxury items in today’s climate.”
Aspects that are shaping the economy in the country for 2023, such as load shedding and the consequent power surge damages, investing cash to go off the grid and climate risk as well as weather-related losses, highlight the complex and evolving nature of insurance.
“As an example, changing weather patterns are translating into an increase in frequency and severity of weather-related claims. Cars and homes are most at risk to flood and storm, so HNWIs must ensure they have location-appropriate cover for these assets and consult with their insurers about any risk mitigation measures that may be required,” Vlok said.
Similarly, HNWIs use appropriate service providers with the proper certification and qualifications when installing back-up power supplies because of loadshedding.
“This is why it is very important to work with specialist insurers in today’s climate. To remain adequately insured, talk to your broker about higher excesses or reducing certain covers.”
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