Ep 127: A Mid-Year Look at South Africa’s Insurance Landscape - Cedric Masondo

Michael Avery (0:00)

Welcome to The Monocle Banking Podcast, as always curated by Monocle Solutions. It's that time of year where we dust off the old crystal ball. We also look in the rear view mirror. This week, we're asking, what are the big themes been that have shaped insurance during 2026 and how to prepare for what's coming next?

My guest this week is the CEO of PSG Insure. Well, the first half of 2026 has provided a rather brutal reminder that South Africa's risk map is being redrawn in real time. We see increasing floods and storms and fires replacing grating pressure on property insurers. Motor claims remain the everyday workhorse of the industry, but the cost of repairing a vehicle is rising sharply. We see aging public infrastructure turning local failure into business interruption claims. And then we've got all of the offshore geopolitical shocks traveling through the oil price and freight rates and imported parts in the Rand. All of that happening while everyone is talking about AI. So the common thread really is that exposure appears to be growing faster than the protection we hold against it. Well, today we're asking exactly what we can learn from the first half and how businesses can build more resilience into the rest of the year. And joining me is Cedric Masondo, the CEO of PSG Insure. Cedric, welcome to the show.

Before we start taking off all of the big crises that have happened from floods to motor claims and cyber attacks, just give us the overview. When you look at the first half of the year, are we simply experiencing a bad run of claims or do you believe South Africa's actually entered a structurally different risk regime?

Cedric Masondo (2:00)

Good afternoon and also good afternoon to your listeners. I think you've summarized it nicely. The first six months has really, it's been a reminder that we're living in the world where the weather is ever changing in terms of climate change and also just some of the risk areas that we're seeing. So the first six months, especially for the people who are living in the Western Cape, was quite a big event. I mean, we had massive floods in the Western Cape. And that is something that we've seen it for years coming. So if you just look at the last 10 years, there's no doubt that changes in climate has had an impact on all of us. We're seeing an increase in frequency of floods and just the impact. I mean, and that's what I will summarize it. And apart from just the increase in cost of repairing a vehicle, which is probably driven by just the supply chain. I mean, parts are coming from all over the world if there's a war, and it always have an impact on motor vehicle parts.

Michael Avery (2:54)

Now, when you say, and weather related catastrophes have become the largest force on claims costs this year, what does largest force mean in practice? Is it the frequency of the claims, the severity of individual claims, the total RAN value, or is it the fact that the losses are increasingly correlated and arriving in clusters around these climate events?

Cedric Masondo (3:16)

I think I will be more leaning towards your third one. And I think we're seeing this in clusters. I mean, and not just the frequency increase, but just in clusters. When there's flood, it tends to be big and affect most areas. If you just go back last year in the outing areas, I mean, it's just raining almost every day in the summer, and causes a lot of damages and the floods.

And in the Cape, we didn't have much floods in the last two years, but the last six months, we've seen just massive floods in a specific area. And I think that is the main issue. We're just seeing an increase in just severity. Severity is becoming a problem and unpredictable. And the scientists are predicting that we're moving to El Nino, which might be prolonged drought or increase in heat. And sometimes during the El Nino, we just have those massive floods, periodically.

Michael Avery (4:08)

And as an insurer, how do you disentangle the climate change drivers from everything else? And maybe rephrase that. I mean, how much of the increase in losses is actually from that changing climate, a more dangerous, more variable climate? How much is simply that we've built maybe more expensive assets in vulnerable places, or we've failed to maintain drainage and roads at a local government level, and then we've watched replacement costs rise? How do you disentangle the two?

Cedric Masondo (4:36)

Maybe let me start with the infrastructure because it's quite big. I mean, so in some areas, it's not like there's a massive increase in floods, just that the infrastructure is failing us, the drainage is not working and so on. So I think that's a problem that can be resolved by just making sure that everyone at municipality level, they do their job, the infrastructure is well maintained, drainage system is working. That does contribute a lot. And secondly, there are areas where people are building in areas that we shouldn't be building. And you find those areas are mainly affected. So those areas, I think these are our own goals. We shouldn't be having those things. We should be maintaining our infrastructure. We should be able not to enforce the bylaws and not allow people to build in areas that we shouldn't be building.