INSURANCE

The hunt for top quality genetics makes playing in the game industry an expensive business, so choose an insurer wisely

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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 nyalas 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 that have been seen recently and the increase in the use of insurance to protect these valuable assets.


Insuring your prized 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 programme depend 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 continue 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 – insuring your investment against unforeseen losses becomes a necessity.

The investment returns in the game industry make 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.

Smith expands by saying 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 that 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 relocation 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 make 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 to consider 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 has a different risk profile. 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, it is taking the risk over from you in return for a premium paid. Because it has 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.

Capacity

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 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 does the underwriter 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 insurer to do its 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 partner, Kuda,” says Sharon Paterson of Infiniti Insurance Limited.
An investment was only good if you were able to realise it at the end.

Wehann Smith, Managing Director of Kuda Insurance, and Sharon Paterson, CEO of Infiniti Insurance Limited

 

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