Dear Valued Client and Broker,

You would have heard or read the media hype around the weakening of the rand
against major currencies. The weaker rand as you know does put upward
pressure on the prices of imported equipment, machinery, stock, materials,
fixtures, fittings etc. You will note from the statistics herewith that the US
Dollar in particular has not improved below the R8 mark since May 2012.

We thought it prudent to remind you how this affects your Sums Insured for
goods which you have imported and which you may need to import in the event
of an insured loss to such property.
If in May 2012 you imported a machine from the United States and it cost you
US$100,000 or R 815 350. In an unlikely scenario where the same machine is
still available for US$100,000 as at the 8th September 2015 you would now pay
the rand equivalent of R 1 398 120. This is a whopping 71.47% increase in the
price.

1
If you insured the item at R815 350 in Y2012 and applied an Annual Inflation
Margin (AIM) increase of 10% on this Sum Insured every year, in Y2015 this
Sum Insured would only be R 1 085 231 as opposed to R1 398 120. If this item
was destroyed in a fire, your claim would be subject to the application of average
as follows:

You will note with horror that you would have to now, incur an unexpected
capital expenditure of an additional R570 755.97 simply because you did not
consider the effect of the weakening rand on your Sums Insured for your
imported goods.
Even if you applied HICs standard renewal proposed Annual Inflation Margin
(AIM) increase of 15% on this Sum Insured every year, in Y2015 this Sum
Insured would only be R 1 240 045 which means that your shortfall in this
claims scenario will be R 313 276.87.

2
These scenarios illustrate the importance of
1. Considering the effects of the weaker rand against major currencies on
your Sums Insured.
2. Our proposed Annual Inflation Margin (AIM) increases on your Sums
Insured at Renewal without which the shortfalls illustrated above could be
substantially higher.

It is never pleasant for HIC to apply average to your claim and we would like to
avoid this, so we encourage you to urgently review and revise your Sums
Insured where necessary.

As you are also aware the depreciation of the Rand also has an impact on the
cost of imported motor vehicle parts and paints amongst other things. The
combination of these increased costs, increased labour and other inflationary
increases has a direct and significant impact on the cost of motor vehicle repairs
year after year. If insurers do not increase motor premiums at renewal they
would have to absorb these additional costs and motor portfolio results which
are already generally not acceptable, would become even worse with the obvious
consequence of significant underwriting loss.

Please feel free to contact our Portfolio Managers, Management or Executive

Management with any queries which you may have.

We thank you for your continued support and co-operation in this regard.

Yours Sincerely,

HIC Team