South African Grid Failure Seminar: What we learnt

On Wednesday, 7 June our South African insurance practice hosted clients, staff and members of the media for a practical presentation on the technical, insurance and legal underwriting implications of grid failure and grid disruption.

Even though experts say that total electricity grid failure is highly unlikely, the possible losses are so big and widespread that no insurer can be expected to cover what are literally uninsurable losses. Insurers have to exclude uninsurable risks but not take away traditional cover for limited events such as for fire, explosion and controlled loadshedding. Clients need to be made aware of the limits to cover to help them manage their risks.

With the threats of a major failure of the supply of electricity, and consequently of water supply and telecommunications services, becoming gradually more serious, many members of the insurance industry have announced that grid failure will be regarded as an exclusion on insurance policies. The seminar gave insurers and intermediaries specific guidance on the possible scope and limits of grid failure and grid disruption exclusions against a background of the courts’ approach to causation, risk and losses.