Forestry in South Africa
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November : Far more than Fire cover

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13 November, 2013

Far more than Fire cover

Runaway fires feature on the news year after year, with stories this year covering bush fires in California, Australia, and the Western Cape, resulting in loss of life and billions of dollars' worth of damage to property. When fanned by high winds, fire-fighters can do little to hold back the encroaching wall of flame, and the deaths of 19 specialist fire-fighters in California is horrific proof of how even experts can succumb. For individuals without insurance cover, the future depends on the charity of the state, friends and family. For commercial timber-growers, insuring their assets is an essential element of their business.

Safire Insurance Company Limited is the most significant insurer of timber in South Africa, with a proven track record dating back to 1987, when a group of farmers and

Pierre Bekker

CEO - Pierre Bekker

timber-growers pooled their resources to create an insurance co-operative to insure their timber at an accessible rate. Initially called the Central Timber Fire Protection Co-operative Limited (CTFP), it operated a scheme whereby members' claims were settled from a central pool of reserves contributed by the members. A re-insurance treaty was simultaneously established with underwriting syndicates at the renowned Lloyds of London, to cover the catastrophic portion of the risk.

Safire's current CEO, Pierre Bekker, is the son of one of the original founding members, Bailey Bekker. He explains how Safire has developed, "In 1997, with the advent of the General Short Term (GST) programme, Safire's insurance cover was extended to include non-plantation short-term insurance to co-operative members. The co-operative's name was changed to South African Fire and General Protection Co-operative Limited, and Safire began to offer general short-term insurance, namely general property and casualty insurance, to the agricultural sector where it had already made its mark and established a firm base of supporters. These clients understood co-operative insurance and the limitations thereof, namely that claim payments would be limited to the extent of the co-operative's pool of reserves - a situation that they were very comfortable with as they knew the high level of reserves available and Safire's firm and longstanding associations with major international re-insurers."

Early in 1999, Safire made a decision to convert from a co-operative to a fully fledged insurance company, a move that came about the following year. Despite this transformation, the company retained its co-operative philosophy while broadening its short-term insurance product range to a wider market. Its clients are still viewed as members of a self-insurance scheme, and Safire practices a policy of selectivity, choosing clients that are risk-averse and responsible, so that these clients do not support negligent, high risk individuals.  In this way, the company sustains a sizeable pool of resources from low claim levels and past profits, resulting in extremely competitive premiums and ensuring that Safire has support from its international underwriters plus its own extensive reserves. Today, Safire is a leading short-term insurer offering a comprehensive range of insurance products, tailor-made to suit its clients' individual needs. Its product range includes: Commercial, Domestic, Agriculture, and Guarantee cover, as well as first and third party cell captives as part of its Alternative Risk Transfer (ART) business. So even though its roots are in timber, Safire now covers a wide spectrum of insurance products.

Safire continues to develop special niche products especially for the agricultural sector, its original marketplace, which is still very loyal to Safire. At the end of last year it launched a structured insurance package for dairy farmers. It also provides crop insurance for sugar cane and macadamia farmers, in addition to its other comprehensive short-term cover. This dedication to its original customer base has paid off: over 70% of Safire's original clients from its co-operative days are still with the company today.

Plantation insurance remains a significant part of Safire's business, with the company offering peace-of-mind to a wide spectrum of commercial timber growers. The company is able to structure insurance packages for any client, large or small, to cover their specific requirements and situation. Due to legislative restrictions (no new timber permits are being issued), Safire has turned its energies to ensuring that its existing client base is superbly serviced and that premiums are retained at sustainable levels. It is very involved at all levels of the industry, with Safire representatives (especially Ruth Bezuidenhout, who is Safire's General Manager: Crop and Agriculture Division), actively involved in liaising with government and forestry bodies. Safire also deals regularly with (and supports) organisations that undertake research into issues that affect the timber industry, such as timber disease.

Safire is recognised as an industry expert, and has been asked to assist with the development of the timber industry throughout Africa. The lure of carbon credits is attracting major investment and the continent is seen as ripe for the development of commercial plantations to offer a vital source of employment to rural and largely uneducated populations. Well-managed, properly run commercial plantations would also offer a sustainable source of timber to protect the fast-disappearing natural forests.

In addition to its advisory work locally and throughout Africa, Safire continues to value its relationships with individuals and efforts are made to assist with high risk problems that might affect both the insured and the insurer, as well as the wider community. "Safire's advertising campaign is based on the theme of symbiotic relationships such as a bee and a flower, a sheep dog and its flock, and our slogan of ‘Short-term insurers, long term partners' describes how strongly we at Safire feel about the importance of mutually beneficial associations," explains Pierre Bekker. "With the industry's rationalisation post-9/11, other insurance companies pulled out of plantation insurance, which has a large catastrophic element of risk. Eventually Safire was the only insurer to offer plantation cover. Safire started out in an incredibly hard market but we maintained our low premium levels and didn't take advantage of the situation. We didn't hike up our rates, so reducing premium volatility, and we became known as a responsible insurer, something our clients have never forgotten."

He continues, "There have been vast changes in the country's agricultural sector through land reform etc, which has been a huge challenge for us as there has generally been a deterioration in risk management. In addition, there has been a consolidation, a shift towards a small group of larger players in the forestry industry and agriculture in general rather than many small operations, leading to a reduced number of potential clients. As mentioned, Safire has for many years been the only plantation insurer consistently serving this market and we feel very responsible for the need to be able to offer cover to even high risk clients - a departure from our original philosophy. We try to find innovative ways to provide cover to high risk operations and individuals that we previously wouldn't consider, and have moved from choosing our clients to creating insurance solutions for certain high risk plantation clients."

These individuals or corporates might be deemed high risk through no fault of their own - perhaps, for example, their plantations are situated in high fire risk areas, or there might be risk management issues. Safire has reverted to using its original co-operative model and differentiates between various levels of clients with three financially independent pools of resources so that there is no cross-subsidisation between high risk and low risk clients. In addition, Safire has become actively involved with incentivising and assisting these high risk clients, helping to alter their specific circumstances by doing research and then advising them on what steps to take to improve their level of risk and so improve their premiums. Bekker says, "Fires cross boundaries and jump fences, so this is for the benefit of all and is a major element of our field extension services. This wider social awareness and community work is a critical part of doing business in South Africa today."

A prime example is how Safire is investing in various projects that promote the safe and sustainable harvesting of honey - a major cause of man-made fires in outlying rural areas and plantations. Safire and its plantation clients identify key individuals in rural communities to help educate and assist the communities and ensure a good working relationship between all landowners. Safire donates smoker units which ensure that honey can be removed in a safe and responsible manner, and distributes t-shirts so that the ‘honey-harvesters' can be identified.

Devastating and widespread fires during 2007 and 2008 put Safire's strong relationship with its re-insurers to the test. These years proved to be the worst that Safire and the forestry industry had experienced in terms of losses, but because of its proven track record and these strong ties, Safire lost none of its re-insurance support from its international and local re-insurers. In fact, the re-insurers have now guaranteed Safire extended insurance capacity for an unheard-of future three year period - "the first time this has ever been done in our sector," says Bekker. "We'd like to say a sincere thank you to our clients for their responsible attitude towards risk management, as well as thanking our re-insurers for their confidence in us as an insurance provider."

The focus on the power of relationships is evident in the structure and day-to-day operations of the company. The management team is based at Safire's head office in Pietermaritzburg, and is made up of long-serving individuals who are committed to developing the company while remaining in touch with individual clients. All queries and business matters are dealt with hands-on and with a personal touch. "Safire does not operate through call centres," emphasises Bekker, which means that insurance brokers deal with Safire personnel who are directly involved with a claim and/or underwriting file. Safire does not handle direct business because the company prioritises the special value that a broker adds for a client in terms of detailed advice and guidance.

Timber touches every part of our lives. Its presence is evident in our furniture and our homes and offices in terms of construction. It is also found in more subtle ways: in clothing (tannins), laptops, cellphones and iPads (silicone). It is a multi-million rand industry offering employment to millions of people and responsibly working towards improving our environment. It's vital that it is protected - by an insurer that understands its needs inside and out.