The Expropriation Act 13 of 2024 (the Act), which has been promulgated to give effect to the Property clause in the Constitution of the Republic of South Africa, 1996 has drawn mixed reactions both locally and abroad.
The purpose of the Act is to provide for the expropriation of property for a public purpose or in the public interest. It provides mechanisms for this to be achieved with compensation paid and for instances where it would be just and equitable for expropriation without compensation.
The Act is still subject to legal challenges, and it remains to be seen whether it will be implemented in its current form. Bearing in mind that the Act makes provision for nil compensation in certain circumstances, the question arises as to the potential impact of the Act, if implemented in its current form, particularly in the insurance sector.
The outlook appears more manageable for insurers and reinsurers, as most insurance policies already exclude coverage for acts of government, which includes expropriation of assets. The result of the exclusion is that insurers are not obligated to indemnify insured parties for any loss arising from expropriation with or without compensation.
There may also be scope for insured parties, such as investors in the country, to purchase appropriate political risk insurance, which covers expropriation and nationalisation amongst other events, to mitigate against any adverse risks arising from the implementation of the Act.
Whilst the Act does not appear to fundamentally disrupt the insurance industry, it has introduced legal uncertainties that insurers can proactively manage. Although expropriation itself is generally an excluded event, there may be knock-on effects that could impact the insurance sector. Insurers are encouraged to review their policy wordings to ensure that exclusions remain clear, current and legally enforceable. Clarity in policy wording is crucial to deal with contentious claims.
As the legal landscape evolves, one thing remains constant: the need for sound risk management. Webber Wentzel's insurance experts are here to help navigate the road ahead.
