Insurer revokes flood cover for Mariental, Namibia

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The flood-prone, 10 000 resident town of Mariental in southern Namibia has again had its flood cover revoked. The Ministry of Agriculture, Water and Forestry has also announced the cancellation of a tender to clear the reeds in the Fish River.

In 2006, insurers paid out more than N$100 million (US$ 11.1 million) in flood-associated damages when properties in the western part of Mariental were flooded following heavy rains. Subsequently, the entire town’s flood insurance cover was suspended. In September last year, however, Mutual and Federal announced the reinstatement of insurance cover for the area. The move was widely celebrated and many residents cancelled their short-term policies to join Mutual and Federal at a higher premium in order to acquire the flood cover.

However, with the rainy season on its way, Mutual and Federal announced last week that flood cover in Mariental will again be revoked.

“All policies that have been endorsed providing such cover will now be endorsed with the flood exclusion with effect from 1 March 2013,” said Mutual and Federal managing director Marcelina Gaoses in a letter to all insurance intermediaries.

According to Gaoses, the risk has been somewhat mitigated by various actions taken by the Mariental municipality, but still poses a serious threat to the company’s balance sheet.

“She informed us at a stakeholders’ meeting that in the absence of participation by other short-term insurers through risk sharing and adequate reinsurance coverage, Mutual and Federal cannot continue with the insurance of flood-prone areas at Mariental,” the chairman of the Mariental Flood Task Force, Chris Nel, reported to The Namibian.

After last year’s reinstatement of the flood insurance, there was a temporary recovery of the town’s economy and banks started lending money again to start new businesses or to expand existing ones.

“There is uneasiness among the Mariental residents with the cancellation of the flood insurance in the wake of the rainy season. This might also have a negative effect on the economy of the town, but we will continue to negotiate with all short-term insurance companies for flood coverage.”

Namibia Chamber of Commerce and Industry, (NCCI) chief executive officer, Tarah Shaanika, expressed disappointment at Mutual and Federal’s decision, noting the risk exposure of businesses operating in Mariental without insurance. “It makes the business environment unfavourable.”

“We would like the company to continue with the flood coverage. However, if a person did not claim for the past five months, Mutual and Federal should consider refunding them for the premiums they have paid,” suggests Shaanika.

Mitigation measures on hold

Adding to the town’s disappointments is the announcement from the permanent secretary in the Ministry of Agriculture, Water and Forestry, Joseph Iita, that the tender to clear reeds and deepen and widen a section of the Fish River has been cancelled.

“The distance of clearing and deepening the river is too lengthy and expensive. The tender will again be re-advertised, but I cannot tell you when at this stage.”

The tender closed on 13 November last year and several applications were received from local contractors before the cancellation. The project was intended to increase the capacity of the river to reduce the risk of overflow.

In 2006, outflows from the Hardap Dam into the Fish River increased rapidly from 800 to 3 500 cubic metres per second. The Fish River can cope with only about 500 cubic metres of water per second. As a result, 122 houses and 78 businesses were almost completely submerged over the course of a three-day period.