According to the latest AfrAsia Bank South Africa Wealth Report, South Africa has the highest levels of total wealth and is home to 43 600 high-net-worth individuals (HNWI) – individuals who hold net assets of at least US$1 million. With a significant annual increase of 8%, these HNWI currently hold over 40% of total private wealth in the country.


Managing Director of Elite Risk Acceptances, Christelle Colman says that these individuals face unique insurance and personal risk management challenges – particularly in a high-crime climate such as South Africa. “As a result, HNWI are gravitating towards different insurance products; products that are better suited to their more complicated risk management needs. However, a mistake that is often made, is over-insuring against minor threats, while underinsuring against the major, less obvious risks that are unique to their situation.”


The report further revealed that South Africa’s total wealth is more than double the next closest African country, which is Egypt, and almost three times bigger than the biggest African economy, Nigeria. The country has as many as 98 centi-millionaires, each with net assets of $100 million or more. Colman adds that the rise in the affluent market highlights the need for a tailor-made, specialist offering that can cater to their specific needs.


Taking into account the clear trend of the continued growth of HNWI in the local market, high levels of underinsurance and relatively low penetration of specialist underwriters, the high-net-worth insurance market in South Africa still clearly has plenty of room to grow,” adds Colman. In addition, she believes that the high-net-worth insurance market in South Africa offers real growth opportunities for brokers who can provide a high level of expertise and personal service required by this segment.


However, in order to do so effectively, it is vital that the key risks faced by HNWI are properly understood. Colman lists some of these unique risks:


  • Higher security risks

Security at home and during travel, including the risks of political turmoil and global conflict, remains a top concern for HNWI. For wealthy families with complex risk exposures, particularly considering the environment of violent crime in South Africa, it is highly recommended that a security expert be consulted. These experts typically provide a full risk assessment that would minimise any security breach, such as home intrusions, a cyber-breach or any other issue that could put the family at risk.


  • Sensitivity around the depreciation of the rand

A uniquely South African risk often underestimated by HNWI is the impact of the depreciation of the rand on the replacement value of their high-value assets often purchased from all over the world. Items typically purchased abroad include imported motor vehicles such as exotic cars and other collectable items such as jewellery, Persian carpets, furniture pieces and art.


Colman, therefore, warns global consumers to continuously monitor the value of their movable assets where there is a potential currency risk and to adjust the values upwards where the cost of replacing these items have appreciated.


  • Employee-related risks

HNWI hire a number of employees to help run their households. Employees bring about risk exposures related to inside job armed robberies and threat of force to the insured families. Wealthy individuals should adopt stringent protocols when hiring as well as terminating employees.  Procedures should include background checks, onboarding protocols, regular performance reviews and the like.


  • Ownership of assets

Lastly, HNWI tends to register ownership of their assets in private entities such as trusts, companies, and closed corporations. It is crucial that brokers work closely with their clients to understand the ownership structures of all assets – as they would for insuring a business with multiple entities – to ensure that insurance cover is properly coordinated and adequate risk protection is being provided.


Given the high values at risk, their complexity, and the need for a bespoke service, the wealth insurance segment is far removed from the high-volume personal lines market. “This growing market segment, requires specialist underwriters and brokers to effectively service their complex needs, “concludes Colman.


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