We advise insurers and reinsurers as well as companies in the industry sectors where risks are inherent and on issues impacting them across the insurance value chain. We have particular knowledge and experience in bank guarantees, fuel guarantees, construction guarantees, mining guarantees and First and Third Party Insurance Claims so that if something does not go as planned you have predetermined recourses at your disposal. In addition we provide in house tracing agents.
Virtually all corporate transactions and activities of the 21st century have complex insurance elements. In some instances, insurance may be the dominant feature in a matter, such as when an insurance portfolio is transferred from one service provider to another, or an insurance claim is repudiated and a dispute arises. In other cases, insurance may form part of a sale or purchase agreement in a cross-border merger and acquisition transactions or in terms of the regulatory approvals that might be required.
We advise on intricate, high-value transactions such as acquisitions and investments, financing, tax and disputes. We are regularly approached by insurers and corporates to provide guidance on insurance-related regulatory, compliance and governance issues.
Our lawyers have strong relationships with financial services regulators in the jurisdictions in which we have offices, combined with a deep knowledge of local laws and regulations, and business conditions.
The Fuel Guarantee Insurance basically means that the Fuel Retailer can use the insurance company as a guarantor when buying fuel. Due to the nature of the fuel business and the high cost of holding stock, cash flow is one of the keys to the success of your business.
The business needs to generate enough revenue to meet daily, weekly and monthly expenses, and at the same time maintain stock levels to ensure uninterrupted trading in accordance with the fuel companies’ requirements. The retailer thus needs sufficient working capital to meet the demands of large fuel payments.
In order to do this, the retailer either takes out a large loan or provides an adequate overdraft facility. The need for a bank guarantee is over and above these requirements. Without a guarantee, the retailer effectively trades on a ‘hard cash’ basis. Revenue needs to be in the account prior to payment for fuel, and delivery is only scheduled subsequent to payment. This working capital required is costly.
In today’s industry where guarantee values requested are reaching levels in excess of R100 million, it makes more sense to use the insurance guarantee, as opposed to tying up excessive cash in providing a bank guarantee. With the introduction of an insurance type product, the fuel guarantee alleviates the need for cash on demand guarantee and allows the service station owner to utilise his or her capital where it is best required – in the business! Having more capital in the business can improve the cash flows further and reduce any loan risks or trading risks.
Typically the cover kicks in when the debit order is unpaid and the fuel company cannot collect the amount due by the retailer. It may also cover rental, lubricants, or trade receivables bought on credit.
First Party and Third Party Insurance Claims
A first party insurance claim refers to a claim that a policyholder files with an insurance company. Such a claim is contractual by nature and contingent on the insurance policy’s specific language.
One example of a first party insurance claim is a claim made by a homeowner whose home has been damaged in a fire. In this case, the homeowner makes a claim with his or her insurance provider to seek compensation for the damage to his or her home and the repair costs incurred. The compensation that the homeowner will receive from the insurer depends on the type or types of coverage included in the insurance policy.
A third party insurance claim is a claim made by someone other than the policyholder or the insurance provider. In this case, the insurer may be regarded as the second party. A liability claim is the most common form of third party insurance claim.
For instance, if your negligence resulted in an accident on a freeway and caused a passenger in another vehicle to sustain injuries, the injured person has the right to file a claim against your insurer. Since no contract exists between your insurance provider and the injured passenger, the passenger, who is the third party, is entitled to seek compensation for losses that may not be covered by your insurance policy. Some examples of such losses include:
Loss of wages
Compensation for pain and suffering