Insurance in the game industry

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Historically, listed equities and fixed properties offered double digit returns. Over recent years, the game industry has yielded the same levels of returns, and has in many instances outperformed the returns achieved by these two investment areas. The industry has seen double digit investment growth returns for the last 10 years.

The game industry is active throughout the year, with a number of big auctions followed by a myriad of smaller auctions where the game owner sells off offspring to recapitalise on their initial investment. Even bigger than the auctions is the market where game owners' trade amongst themselves, either in person or through a vast network of game capturers and traders.

Any returns are merely "paper" profits until such time as the whole or part of the investment has been realised.

"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.

Gert Pienaar 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.

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. 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.

These factors have been identified 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.

Capacity

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.

"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 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," says Paterson.