Page 48 - Be Reasonable – Do It My Way , Peter E. Daly AM, My Story

CHAPTER 3 - JOHANNESBURG TO DURBAN TO CAPE TOWN TO PORT ELIZABETH AND BACK TO JOHANNESBURG
people and then bumping off someone else, getting a doctor who was part of their ring to sign a death certificate. Once the person was buried then the money would be shared between the agent, the insured, the doctor and so on. The police tapped their telephone lines. I couldn’t believe it when I was privy to listening to some of the calls and who they were going to bump off etc. Quite frightening.
Besides setting about planning the future of the General Insurance side of L&G,
Alan Mason and I were seconded to handle a major claim arising from a development at Noordhoek (Cape Town), where a developer had been provided with a performance guarantee. Such a guarantee was unusual as the company stood in the place of the bank and in fact was guaranteeing the bank.
The original policy had been issued for a limit of R100,000 of which 50% was ceded to reinsurers. By way of endorsements the branch had increased the cover progressively to R1.2m as the project expanded. However, the reinsurance process had failed and no more reinsurance had been purchased or placed! You can imagine what a disaster this was for L&G (at the time, in the early 1970’s, the Rand was worth more than the Australian dollar). In today’s terms the loss is equivalent to somewhere approaching $34m.
This development at Noordhoek involved one of the first creations of a housing settlement using the seawater and creating inlets and canals. The developer would draw on the guarantee as and when it was required to pay the contractors. There were a number of contracts and Alan and I spent lots of time examining each contract.
We tackled it with forensic attention to detail and also analysed every other performance guarantee the Company had issued. We successfully contained our losses on most of them but we eventually came to the conclusion that we could not continue to provide the finance for Noordhoek as there was little hope in making a recovery following the failure of the developer.
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