Consumer retail billionaire Christo Wiese has stepped in to rescue EthiQal, a popular local medical indemnity provider, after its parent company, Constantia Insurance, was wound up in the High Court on Wednesday, giving hundreds of anxious doctors new hope, writes Chris Bateman for MedicalBrief.
In a scramble to retain its considerable higher risk client base after news broke of Constantia Insurance’s curator applying for a liquidation order on 31 August, EthiQal issued a statement a fortnight ago assuring doctors that it was in negotiations with an insurer and/or backer to ensure it had the legally required reserve funds to continue doing business.
With just two weeks left of a 31-day notice given to EthiQal indemnity policy holders by former curator Ashish Desai to find alternative insurers, Wiese issued a statement on Wednesday, saying one of his companies, Titan Equity Funding had, “committed a substantial amount of capital to establish a new stand-alone company for EthiQal (“New Ethiqal”). With Titan’s backing, New EthiQal would offer current EthiQal policyholders a new policy through a licensed insurer whom Titan was in negotiations with – ‘on substantially the same terms as their existing one”.
Once accepted, the new policy would be covered from 1 October 2022, so there would be no gap in cover, a major cause of worry for doctors until now. The benefits, terms and conditions would remain substantially the same, with some adjustments to the occurrence-based product required. Policyholders’ premiums would remain the same (unless its due to increase as part of the policy renewal).
Titan is part of Wiese’s private investment group with significant interests in the retail, industrial supply, property, food manufacturing, wellness and financial services industries, among others.
Wiese said Titan was working with a licensed insurer and the regulators for the necessary licensing and regulatory functions for the new policies.
“We have engaged with the Prudential Authority and the newly appointed liquidator, (Mr Cloete Murray), to ensure a transfer of the requisite infrastructure and people to New Ethical in time for the 1 October hand over. Brokers and reinsurers are also working with Titan to implement the proposed solution by 1 October. Further communication will follow next week with more details and next steps,” Wiese added.
Competition the winner
EthiQal is the second largest medical indemnity player in South Africa after the London-based Medical Protection Society (MPS), and has successfully targeted a niche market of higher risk practices, with a third of the country’s surgical specialists on its books.
Meanwhile, Desai issued a statement confirming that a potential investor had ‘expressed interest’ in acquiring the medical division of Constantia Insurance (EthiQal), ‘to create a cell structure with a licensed insurer to underwrite medical malpractice insurance policies.’
He said discussions had been held between Titan and the Prudential Authority after Titan had “articulated their interest.” Desai said he had briefed the liquidator who would ‘urgently explore this possible transaction.”
He reminded policy holders that the ‘potential break,’ in cover was a consequence of the termination notice Constantia Insurance had issued them to enable them to secure cover from other insurers. That termination notice, ‘should, however, not be regarded as an indication of a change or deterioration in their risk profile," he added.
EthiQual chief executive Alex Brownlee was unavailable for comment on deadline.
The board of Conduit Capital, the parent company to Constantia Insurance chose not to oppose the application by the Prudential Authority and Desai to place Constantia in liquidation earlier this week.
Meanwhile the MPS said it had taken ‘hundreds,’ of calls from doctors impacted by the controversy.
Graham Craig, MPS business development director for South Africa, said all doctors who applied to MPS would be assessed on a case-by-case basis.
This in an increasingly litigious SA environment where the public sector bill for accumulated negligence claims stands at over R72bn (under audit).
Craig cited Desai’s earlier warning that the Constantia Insurance curator would not pay any existing claim to avoid the possibility of any preference being given to some claimants over others prior to ‘concursus creditorium” being established. This concept emphasises the right of a group of creditors as opposed to the rights of any individual creditor, enabling the assets of the insolvent to be split proportionally amongst creditors.