Escap SOC Limited |
 |
Escap SOC Limited (Escap) is a captive short-term insurance company, meaning it can only insure risks of its parent company Eskom and its subsidiaries. Escap provides cost-effective, customised short-term insurance products to the Eskom group (other than nuclear and aviation liabilities) through a combination of self-insurance and reinsurance with external insurance markets.
Operating highlights
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Escap’s net assets amount to R920 million, exceeding the target solvency capital requirement in terms of the Solvency Assessment and Management (SAM) interim measures of R634 million |
| • |
Net operating expenses as a percentage of net earned premiums are 4.4% (target: <10%) |
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Money-market investment performance measured in comparison to the short-term fixed-interest composite index (STEFI) is 5.7% (STEFI is 5.3%) |
Operating challenges
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Net claim expenses as a percentage of net earned premiums are 222% (shareholder’s compact target: <90%). This is largely due to the over-pressurisation incident at Duvha power station (refer to page 28) |
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Return on equity is negative 59.6% against a target of 6%. This is due to the impact of large claim losses on Escap’s profitability |
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Listed share investment performance measured in comparison to the shareholder-weighted index (SWIX) of the Johannesburg Stock Exchange is 15.8%, against a target of 20.6% |
Shareholder’s compact with Eskom
| Indicator and unit |
Target
2013/14 |
|
Actual
2013/14 |
|
Actual
2012/13 |
|
Actual
2011/12 |
|
| Equity portfolio return (1 year) > SWIX, % |
20.6 |
|
15.8 |
|
4.7 |
|
2.4 |
|
| Money market portfolio return (1 year), > STEFI, % |
5.3 |
|
5.7 |
|
5.8 |
|
5.8 |
|
| Expense ratio, % |
10.0 |
|
4.4 |
|
5.6 |
|
6.5 |
|
| Incurred loss/claim ratio, % |
90.0 |
|
222.0 |
|
100.1 |
|
89.0 |
|
| Solvency assessment measure, R million |
634 |
|
920 |
|
1 702 |
|
1 4931 |
|
| Return on equity, > Eskom’s WACC, % |
6.0 |
|
(59.6) |
|
7.3 |
|
11.0 |
|
| 1. |
Reported as R1 193 million in 2012/13, as this represented Escap’s net assets less the solvency capital requirement. The measure has
been updated to show Escap’s net assets. |
| STEF |
Short-term fixed-interest composite index. |
| SWIX |
Shareholder-weighted index. |
Future focus areas
| • |
Implementing appropriate processes, procedures and systems to meet the Solvency
Assessment and Management (SAM) compliance requirements |
| • |
Participating in regulatory quantitative impact studies and pioneering the interests and
perspectives of captive insurers |
| • |
Ensuring optimal capital utilisation and demonstrating consistent value-add to the Eskom group |
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| Rotek Industries performs a substantial portion of the maintenance to major power station and transmission
components |
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