Public shopping areas need a clear description of their use
Retail space is assessed by its size, its use and who has access to it. A public shop, a wholesale outlet where access is limited and a back-of-house store do not create the same safety or fire risk.
Retail usually needs more attention to customer numbers and escape arrangements than an office because the public can enter freely and visitor numbers can change quickly. The larger and busier the shopping area, the more important it is to confirm that its safety arrangements match the people it can hold.
A shopping centre is never one simple risk. Line shops, supermarkets, wholesale areas, food courts, restaurants, cinemas, parking, plant rooms, offices and bulk storage all need an accurate description. Where an area is used differently from the rest of the centre, identify it separately for the insurer.
Source: National Building Regulations and Building Standards Act 103 of 1977, regulation A20 and Table 1, read with regulation A21 and Table 2 (design population).
Loss of attraction and prevention of access: the retail-specific interruption extensions
A standard business interruption section responds to loss following damage to the insured property. Retail is the class where that trigger most often fails to capture the actual loss, because a centre can be undamaged, fully operational and empty.
Two extensions address it. Prevention of access, sometimes written as denial of access, responds where damage to property in the vicinity prevents or hinders access to the insured premises even though the premises themselves are undamaged. A fire in an adjacent building, a collapsed structure closing the access road, or damage to a neighbouring property that causes an authority to close the area are the scenarios it contemplates.
Loss of attraction responds where damage to a specified nearby property reduces the number of customers coming to the insured premises. For a centre built around an anchor tenant, this is the more important of the two. If the anchor is destroyed and takes fourteen months to rebuild, the line shops trade at a fraction of their previous turnover throughout, and the landlord's rental stream reflects it. Both extensions are usually limited by a distance radius, a sub-limit and a shorter indemnity period than the main section, and all three limits are worth reading rather than assuming.
Read our business interruption insurance guide →
Turnover rent, and what belongs in the rental sum insured
Retail leases frequently combine a base rental with a turnover rent calculated as a percentage of the tenant's trading figures, and add recoveries for operating costs, rates, utilities and marketing levies. A rental sum insured built only from the base rent understates the income the landlord actually loses.
The correct figure is the gross income the landlord would have received over the indemnity period, projected forward rather than taken from the last audited year, and including the recoveries that stop when the tenant stops trading. Marketing levies and promotional fund contributions are easy to miss because they are not thought of as income, but they fund an obligation that continues.
Increased cost of working matters more in retail than in most classes, because a centre can often keep trading in a reduced form. Temporary structures, relocating tenants within the centre, hoarding, additional security, extra cleaning and an intensified marketing campaign to hold foot traffic are all expenditure that reduces the ultimate loss, and all of it needs headroom in the cover.
Fit-out, shopfitting and the layer that falls between two policies
Retail fit-out is expensive, tenant-specific and almost always installed by the tenant to the landlord's shell specification. Shopfronts, ceilings, lighting, floor finishes, cold rooms, extraction canopies, air conditioning and the tenant's electrical reticulation are installed by the tenant and, in most circumstances, become part of the building.
Where the landlord's sum insured was set on the shell and the tenant's policy covers stock and removable contents, that layer sits between two policies. In a centre with sixty tenants the aggregate figure is substantial, and it is discovered at the point where an adjuster asks who is claiming for the ceiling.
The lease usually also imposes a reinstatement obligation requiring the tenant to return the premises to shell condition at the end of the term. A tenant whose fit-out is destroyed can find that obligation surviving the fire. Both sides of that boundary should be established from the lease and the schedules before renewal rather than after a loss.
Public liability across common areas, parking and the trading floor
Retail concentrates the public in a privately owned space, which is the definition of an occupiers liability exposure. Slips on a wet floor, escalator and travelator incidents, lift entrapments, falling signage, trolley injuries, parking area collisions and injuries during a promotional event all arise from the common property the landlord controls.
The statutory duties run alongside the liability policy rather than instead of it. The Occupational Health and Safety Act imposes a duty in respect of persons other than employees who may be affected by the undertaking, and the building regulations place safety and compliance obligations on the owner or the person in control of the building. The Consumer Protection Act adds a separate route to liability for harm caused by goods and services, which reaches the retailer directly and the landlord in some circumstances.
Security services introduce a further layer. Where guarding, access control or crowd management is outsourced, the security provider carries its own registration and liability position, and the indemnity arrangements in that contract determine who ultimately answers for an incident on the concourse.
Source: Occupational Health and Safety Act 85 of 1993, sections 8 and 9; Consumer Protection Act 68 of 2008, section 61; National Building Regulations and Building Standards Act 103 of 1977.
Read our public liability insurance guide →
Sasria: the exposure retail property understands best
Riot, strike, public disorder, civil commotion and connected malicious damage are excluded from every standard commercial property and business interruption policy sold in South Africa. Sasria SOC Ltd, the state-owned special risk insurer, is the only insurer permitted to provide this cover, and it is issued as a coupon attached to the underlying policy.
Retail property carries this exposure more visibly than any other commercial class, and the July 2021 civil unrest demonstrated the two failure modes at scale. The first is a Sasria sum insured that does not mirror the main policy, so a centre fully insured for fire is only partly insured for the event that actually happened. The second, and the more damaging, is a material damage coupon with no matching business interruption coupon.
The second failure is specific to how retail losses behave. A centre closed by public disorder loses trade for far longer than it takes to replace the shopfronts, because tenants that were looted may not reopen, foot traffic returns slowly, and the letting market for a centre with a recent unrest history tightens. The interruption is the larger number, and it is the one most often left uninsured.
Source: Insurance Act 18 of 2017; Sasria SOC Ltd, the state-owned special risk insurer for South Africa (FSP licence 39117).
COMMON QUESTIONS
Retail and shopping centre insurance questions, answered clearly.
Why does a shop's size and use matter?
The size of the space, the people who can enter it and the activities carried out there affect the safety and fire measures it needs. A public shop, a wholesale outlet and a storage area should be described accurately so that the insurer understands the exposure.
Is a shopping centre insured as one type of risk?
It should not be described as one. Line shops, the anchor tenant, food court, cinema, parking, plant rooms, bulk stores and offices above the retail all carry different risks. Give the insurer a clear picture of each material area.
What is loss of attraction cover?
An extension that responds where damage to a specified nearby property reduces the number of customers coming to the insured premises. For a centre built around an anchor tenant it is often more important than the main interruption section, because the line shops can trade at a fraction of previous turnover for as long as the anchor is closed.
What is prevention of access cover?
An extension responding where damage to property in the vicinity prevents or hinders access to the insured premises even though the premises are themselves undamaged. It typically carries its own radius, sub-limit and a shorter indemnity period than the main business interruption section.
Should turnover rent be included in the rental sum insured?
Yes, along with operating cost recoveries, rates, utilities and marketing levy contributions. The figure should be the gross income the landlord would have received across the indemnity period, projected forward rather than taken from the last audited year.
Who insures a tenant's shopfitting?
It depends on the lease. Shopfronts, ceilings, lighting, floor finishes, cold rooms, extraction and tenant electrical work are installed by the tenant but usually become part of the building, so if the landlord insured the shell and the tenant insured stock and removable contents, that layer can fall between the two policies.
Does the landlord's liability cover the security company's actions?
Not automatically. An outsourced security provider carries its own registration and liability position, and the indemnity arrangements in that contract determine who ultimately answers for an incident. The insured parties and the contractual liability position under the policy should be confirmed rather than assumed.
Why is the Sasria business interruption coupon so important for retail?
Because a centre closed by public disorder loses trade for far longer than it takes to repair the damage. Tenants that were looted may not reopen, foot traffic returns slowly and letting demand tightens. Sasria business interruption cover attaches to the underlying interruption section, so a material damage coupon alone leaves that larger loss uninsured.
Are cash and stock losses covered under the building policy?
The building policy responds to the structure and the landlord's interest. Tenant stock, cash and glass are usually insured by the tenant under its own business policy, which makes the boundary between the two programmes worth establishing in the lease rather than at claim stage.
What happens if part of the centre is converted to another use?
Converting retail space to a restaurant, gym, medical suite or storage changes the building's risk. Confirm that the space is approved and suitable for the new activity, then disclose the change to the insurer before it starts.
