Insurance, Genetics and the Game Industry
By Wehann Smith - Kuda and Sharon Paterson – CEO Infiniti Insurance
Kuda has successfully positioned itself as a major player in the Game Insurance market to complement its already very successful Bloodstock and Sports Horse products. The 2014 ‘Game’ season is now in full swing and although expected, it is comforting to see previous price trends being confirmed and some new very exciting developments already happening. ‘The demand for top quality breeding animals is driving prices higher with Njalas being the one species that has seen record prices at every auction. All indications are that these trends will continue for some years to come albeit that the pace of growth might slow down a touch,’ says Wehann Smith of Kuda.
The hunt for top quality genetics makes playing in the game industry an expensive business and, as with all expensive assets, you should insure.
Game farmers historically did not insure their animals. Animals were bred for hunting purposes and typically the best genetics were killed first as they produced the best trophies. Everything has changed in the last 10 years. The ‘hunt’ for prime genetics is the only single driver of all the exceptional prices which have been seen recently and the increase in the use of insurance to protect these valuable assets.
Insuring your prised animal is, and never will be to replace that specific animal, but it will put you in a much better financial position to be able to ‘hunt’ for something with similar genes. Replacing an animal of this kind in a herd, with an animal of similar qualities is a non-negotiable as the genetics and breeding program depends on continuously bringing in new and better genetics.
Prime genetics are in very short supply currently and will be in short supply for some years to come. The only sensible conclusion to be drawn from this fact is that supply and demand will keep on driving up the prices of good quality animals.
The number of new entrants in the game industry is staggering, the breeding of game is fast replacing rugby as the main topic around our South Africans’ famous braai fires and insuring your investment against unforeseen losses becomes a necessity.
The investment returns in the game industry makes it ‘Prime Genetics’ in the investment world but these ‘paper’ profits need to be protected.
‘There are numerous risk factors which can influence you realising the return on your investment, but fortunately these factors are all Insurable Risks,’ says Sharon Paterson, CEO of Infiniti Insurance, the insurer of Kuda.
Wehann Smith expands by saying that it would be foolhardy to invest your efforts tending to your animals with the greatest of care, only to take the risk of not safeguarding your animals to ensure they reach the final investment realisation phase. This phase is the last step in ‘banking’ your profits and it’s the most important step in turning paper profits into real returns.
There are a number of factors which can contribute to game mortality, but for the purpose of this article we will look at only those which the insurance industry has identified as Insurable Risks.
Most animals that are being moved, either for re-location purposes on the farm, or when sold - are routinely tranquilised. The risks involved in this process are numerous, but can be complicated or mitigated by the experience of the helicopter pilot, the Vet, the ground team and the weather to name but a few factors. No matter how well prepared or experienced the teams are, there is always a risk of mortality.
After capture the animals have to be transported either to the buyer’s farm - or if the animals are to be auctioned, to the Auction Holding Pens. The risks involved in the transportation process are numerous – one such risk could be poor ventilation of the transporter’s trucks.
In all cases of handling game there is by default a measure of stress to the animal. The animals concerned are wild by nature and being handled can result in stress causing death. In some instances they die from stress-related causes shortly after their release.
Theft of game is slowly but surely starting to raise its ugly head. The prices for animals makes it very lucrative for thieves but fortunately the introduction of DNA sampling and building of DNA databases will eventually curb this problem.
These factors have been identified by the Insurer as Insurable Risks, and hence neither the buyer nor seller need take the risk of total loss as this can be insured against.
Important aspects when choosing an Insurer
It is common knowledge in the game industry that certain species of game are more resilient to the process of capture, translocation and being held in holding pens. It is therefore important to choose an Insurer that understands the risks associated with the different game species and factors that can add to or mitigate these risks.
It is also important to choose an Insurer that understands that each individual or group of individuals have different risk profiles. Having an Insurer that determines your individual risk profile, which is then reflected in the premium charged, is a win-win situation - and one grounded to a very large extent in a partnership with your Insurer. You need to choose an insurer with a partnership philosophy.
It is important to note that when an Insurer agrees to give you cover for a certain risk that it is taking the risk over from you in return for a premium paid. Because they have taken over the risk from you, the Insurer has the right to set requirements as to the preferred Vet, game capturer and transporter to be used. These should be seen as risk mitigating factors as the ultimate goal of the insured and the Insurer is to deliver the animals alive and free of harm at their final destination.
When it comes to capacity make sure to choose a ‘Prime Genetics’ insurer.
With the high prices that good quality animals are reaching at auctions, one of the most important factors in choosing an Insurer is capacity. Make sure that your Insurer has the underwriting capacity to insure your existing high-valued animals, and be sure that you check the underwriting capacity of your Insurer before going to an auction to buy a multimillion rand animal.
What do the underwriters say?
‘Kuda are spot on in their assessments of this highly specialised field. The game industry is not to be entered into lightly. It’s essential for an in Insurer to do their homework before considering underwriting any new class of business – and part of this process is to roll up your sleeves and understand the environment so that you can assess areas of risk. In addition you have to have implicit trust in the expertise of your underwriter. We are really excited to enter this new and fast growing area of business which is so much part of the South African culture with our partners, Kuda’, says Sharon Paterson of Infiniti Insurance Limited.
An investment was only good if you were able to realise it at the end.
Kuda was established in 2008 as a specialist race horse underwriter. After achieving great success in this industry the offering was soon extended to include equestrian horses. Kuda is locally underwritten by Infiniti Insurance Limited. Re-Insurance is obtained from a variety of syndicates within Lloyds of London which ensures access to significant capacity and enhances Kuda’s ability to underwrite high valued animals. The structure gives Kuda the flexibility to satisfy local needs whilst the Lloyds arrangement ensures the appetite to take on big individual risks. The structure allows Kuda to be innovative within the industry whilst ensuring that there is a big focus on risk management.
Kuda recently extended their product offering to include Game, they firmly belie that the experience and factors which made them successful in the horse industry in South Africa can be applied in achieving success in this fast growing industry.
About Infiniti Insurance
Infiniti Insurance is A-(ZA) GCR rated and short-term insurer focused on long-term partnerships with specialist insurance entrepreneurs and independent brokers. Infiniti commenced business in 2005 with a limited licence enabling it to write motor, miscellaneous and personal accident business, and then in 2007 applied for and was granted a full license to write all classes of business. Infiniti positions itself as a specialist niched insurer - and writes everything from aviation, marine and watercraft to blood stock and everything in between – and now with the recently acquired Legal Sense, it offers commercial legal protection too. Infiniti prides itself on its model of strong partnership philosophy, providing an unparalleled level of service to its clients. Its specialist underwriters and broker partners enjoy the exceptionally high levels of technical expertise, assistance with risk management and the flexibility to manage their business effectively. Infiniti are very particular about the partners they choose - and have currently 20 brokers and 15 specialist underwriters.
Infiniti Insurance Limited
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