The recent devastating floods and storms across the Eastern and Western Cape, including Robertson, Ceres, the broader Breede River region and the Garden Route, have left commercial farmers and businesses reeling from the damage to crops, livestock and infrastructure, with various industry associations estimating the damage to be in the billions of rands.

This has sent a stark warning to South Africa’s commercial and agricultural sectors: Climate volatility is no longer theoretical, it is a real, active operational hazard.

Rojeanne de Wet, liaison officer at Agri Western Cape says the recent floods have had a severe impact: “Across many affected areas, farmers have lost water pumps and other critical water infrastructure, while also suffering extensive damage to orchards, tunnels,houses, and farm buildings such as cellars and barns.”

The Western Cape Department of Agriculture (WCDoA) is currently assessing the extent of total damage and losses in the province, with preliminary results from 1 400 respondents indicating estimated losses of R520 million. In the aftermath of the flooding, varioussources have estimated that only one third of the 35,000 commercial farmers in South Africa currently have insurance.

Wehann Smith, founder and CEO of Kuda Holdings, which offers specialised bloodstock, agricultural and other specialised commercial insurance, says what used to be a once-in-a-generation anomaly is becoming a frequent occurrence necessitating a deliberate, specialised approach to business insurance.

“The last comparable disaster was more than 100 years ago, and yet, in the space of three years the Western Cape has been battered by two catastrophic floods. Notwithstanding the very real, human impact, businesses face a grueling cleanup and rebuilding phase.

Smith says: “What we can say with certainty is that many farmers remain underinsured, and many businesses discover gaps in their cover only after a major event such as a flood, fire or drought.

“The tragedy has offered key lessons on how traditional commercial and agricultural insurance needs to be approached to at least have commercial peace of mind when tragedy strikes,” says Smith.

The critical flaw in the traditional approach to corporate and agri-reliant insurance is that it is treated as a static financial line item, a grudge purchase to be bargained down during annual renewals, he says. “We all know that the economy is navigating tough headwinds, and so it is understandable if it is tempting to try to shave down insurance premiums by trimming coverage. Yet, the stark reality is that when standing on an utterly devastated farm, surrounded by infrastructural ruin, the exercise is not just about replacing physical bricks and mortar, rather it is fundamentally about business continuity,” says Smith.

He explains: “During the claims stage you are not just asking for a payment to rebuild a wall or bridge on the farm, you are fighting to keep your supply chain alive, protect your cashflow and maintain employee continuity while operations are paralysed. What we have seen with absolute clarity over the past few weeks is that the real test of an insurance policy is not what it costs you during a renewal meeting, but how it performs when your entire business is underwater.”

Critical insurance lessons from the recent floods
Luzinda Bouwer, an experienced insurance broker at Kuda Insurance Brokers, has spent the past few weeks visiting damaged farms and commercial properties. She outlines five vital risk management lessons all businesses would do well to implement immediately.

Confronting the under-insurance trap – the Average Clause
Underestimating the replacement value of buildings to secure lower premiums is a common error, says Bouwer. “If a building worth R8 million is insured for only R4 million, the insurer may treat the property as only 50% insured. A R2 million claim could thereforeresult in a payout of only R1 million, leaving the business to fund the balance itself.”

Sourcing formal rebuild evaluations
Bouwer explains that rural properties and businesses face unique logistical hurdles. “Rebuilding in a remote rural valley, for example, costs significantly more than building the same structure in a metropolitan hub. Businesses must secure formal reinstatementvaluations from professional evaluators who specialise in rural infrastructure instead of relying on market estimates.”

Securing multi-year escalation cover
Rebuilding a specialised commercial facility or historic farm structure is not a quick exercise. If the rebuild takes longer than a year, inflation will quickly erode the insurance payout. “Understanding this reality through experience, the onus is on brokers to convince their clients to consider adequate building escalation provisions and extended rebuilding cost protection where available.

Reviewing Business Interruption (BI) and access-related cover
Many businesses focus on insuring their buildings and contents but overlook critical infrastructure such as private roads, bridges and dams. Bouwer notes that if flood damage prevents access to a business, operations can be disrupted even where the main premisesremain undamaged. “Businesses should work with their brokers to ensure key infrastructure exposures are identified and that appropriate property and business interruption extensions are considered to minimise potential financial losses.”

Maintaining proactive, continuous disclosure
Risk is dynamic, explains Bouwer. “If a commercial tenant moves out and a warehouse sits vacant, or if a previously vacant space is used to store hazardous materials like paint or industrial oils, the insurer must be notified immediately. Failing to disclose a shifting risk profile may prejudice a claim or entitle the insurer to reassess coverage, depending on the circumstances and policy wording.This is the last thing you want to deal with in the midst of tragedy,” she says.

When humanity comes to the fore
“Despite millions of rands of damage across our books, where we are working closely with our clients and insurers, we have noticed how the community has pulled together,” adds Smith. “Farms are lending hands and resources to neighbours and coming together in the face of adversity. Across our clients, there are stories of stud farm grooms, some of the most vulnerable members of society, ensuring that animal welfare remained their top priority during the devastating floods and personal losses. Not a single horse was lost across our books and this selflessness represents the true heartbeat of our agricultural sector.

“It reminds us that while insurance can manage the risk of the bricks and mortar, it is humanity that ultimately saves a business.”