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Catastrophe
Saturday, April 1, 1989
SA’s biggest

The latest estimate for the Sasol 3 fire puts the loss at R250m, still the biggest single insured loss in South African history. The insurance carries a R40m deductible. This means Sasol will pay the first R40m of the loss out of its own account. Sasol’s lead insurer, Guardian National, says it could take up to 18 months before final settlement is made,
The accident happened at Secunda on January 3rd 1989 when a pipe carrying an oil and gas mixture ruptured. The fire could be seen 10 kms away. Twelve people were killed and nine were injured.
At the time, the original loss was put at R400m, comprising R50m material damage to plant and R350m in respect of loss of production. While an initial estimate is often made on the conservative side, it is also apparent that good risk management techniques on the part of Sasol and a faster repair time contributed considerably to reducing the loss outcome.
According to reports assessors have found that, “Risk control has been extremely well handled by Sasol.” One of the reinsurers involved, says it flew out an engineer from the UK “to get our Own view on it, And according to our information Sasol has done a fantastic job to minimise the loss.”
Explains another, “The reaction by internal firefighting teams was very good.” In addition Sasol is finding it possible to produce a lot of necessary replacement items locally, in shorter time than expected; and this may further reduce the final loss result.
Capacity for the local insurance market is limited for a risk of this size and complexity with more than 50% of Sasol’s insurances going overseas. One commentator says that the loss comes at a bad time, “Recently, we had the Orange Free State floods in February. There was the January fire at Frame Group; and, the foundry explosion at Murray & Roberts.”
There was also the fire near Wepener, Bloemfontein last February causing an estimated loss of R2m when four buildings were destroyed by fire. It was believed to have arisen following an electrical short circuit caused by lightning.
As far as the Sasol loss was concerned, insurance representatives have already been over to London. The risk comes up for renewal on July I and, doubtless, they were preparing for future negotiations with overseas insurers and reinsurers.

Copyright © Insurance Times and Investments® Vol:2.4 1st April, 1989
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