Why the real estate insurance model must evolve

Strategic Risk Services.
The cost of insuring South Africa’s built environment is more than just a line item – it has become a systemic pressure point. As premiums rise year after year, the financial burden does not stop at landlords’ doorsteps. It filters down to tenants, retailers, and ultimately to every consumer navigating a shopping mall; in fact, every taxpayer.

This isn’t simply a sectoral squeeze; it’s economic inefficiency. Rising insurance costs inflate operating margins, strain competitiveness, and threaten sustainability and growth. 
If resilience is the true measure of sustainability, then our current insurance paradigm is failing this test.

When risk perception outpaces reality
At the heart of the issue lies a global-local misalignment. South African risk is predominantly underwritten by offshore reinsurers, mainly British and European syndicates, who utilise models that frequently fail to capture the lived realities on the ground. Political unrest, for example, has previously led to sudden withdrawals of cover. Sasria intervened, but this incurred a long-term fiscal cost.

This highlights a deeper issue: perception is distorting price. With global reinsurers “holding the pen”, underwriting power lies far from the assets themselves. The result? Inflated premiums based more on global volatility sentiment than data-driven local risk profiles.

Closed loops and captive markets
This is exacerbated by minimal transparency and even less competition. Infrastructure assets are primarily reinsured offshore, not due to a lack of local capacity, but because entrenched relationships and legacy pathways dominate decision-making.

Even real estate financing structures contribute to the inertia. Banks often recommend, and can even mandate, insurer preferences, which lock property owners into high-margin ecosystems that favour the status quo over strategic review. With a captive market, innovation is stifled and efficiency is sidelined.

When taxpayer-funded government buildings are included in this model, the demand for transparency and data-driven risk profiles transcends mere financial considerations; it becomes an ethical and fiscal imperative.

Insurance as a strategic lever
Cushman & Wakefield | BROLL modelling indicates that there are achievable savings of 8% to 12% in insurance premium expenditure through better communication, strategic alignment, and more sophisticated data engagement. For a REIT paying, say, R80 million in insurance premiums annually, this translates to R8.75 million in year-one relief alone.

In an economy constrained on every side, where increased marketing promotions or parking revenue can only take you so far, insurance stands out as one of the few controllable costs for property. Yet, many CFOs are hesitant to approach it. The fear of post-crisis blame looms large, leading to a ‘don’t fix it if it isn’t broken’ attitude that ensures outdated models persist under the guise of prudence.

So, how do we break the cycle?
Unless we challenge the model, we are bound by it. Change begins with posing some difficult questions:
Why aren’t we diversifying our reinsurance sources, for instance, into Asia to inject competitive pressure?
Why do we accept decades-old defaults of syndicates without challenge?
Why has the sector been resistant to innovation in data and risk structuring?

These questions represent calls to action. We’re not advocating burning bridges, but we are promoting the construction of better ones. The real estate insurance of the future must be data-driven, empowering, and locally aligned.

There is a significant opportunity for prominent landlords to redefine risk as a strategic enabler and elevate insurance to a board-level discussion instead of merely an administrative cost.

For those still in a wait-and-see mode, consider this: regulatory tightening, investor scrutiny, or another market shock could bring about change more swiftly than you are prepared for.
Those who act quickly will not only save millions; they’ll be pioneering a smarter, fairer way to price, share, and manage risk across South Africa’s built environment.