By Wynand van Vuuren, Client Experience Partner at King Price Insurance
Climate change is real – and it’s not only driving a massive uptick in the number of weather-related disasters in South Africa in recent years, but it’s going to change the way insurers help society to manage risks better in the future.
Natural disasters in South Africa are becoming increasingly common at a staggering cost to the economy and the insurance industry. The Knysna fires and Cape storms of 2017 are estimated to have cost the local insurance industry between R3 billion and R4 billion, while the estimated cost of infrastructural damage from the KwaZulu-Natal floods in 2019 was R1.1 billion. 2022 has already brought widespread flooding across the country, causing extensive damage to property and crops.
Global reinsurer Munich RE estimates that natural disasters caused around $280 billion of damage in 2021, with insured losses of approximately $120 billion – making 2021 the second-costliest insured loss year ever.
Right now, there’s no danger of insurers not being able to pay claims. In South Africa, the industry regulator requires all insurers to maintain adequate surplus funds and reinsurance for potential claims for their exposure to large catastrophe events, like flooding and drought.
The problem is that weather-related disasters are only going to increase in the coming years. The Institute for Security Studies says there’s been a 57% increase in weather-related events over the past 20 years compared to the preceding two decades, and climate scientists believe this trend will continue to rise.
But what does this mean for South African businesses, farmers and homeowners? The insurance industry is built on the concept of managing risk – and instead of simply increasing premiums, it’s already looking at ways to help clients mitigate their own risks and using data analysis to flag potential areas of future risk.
We’re already seeing the risks from extreme weather events like wildfires, flooding, storms and hail increasing in South Africa. We never want to be in a situation where people in some areas can’t afford insurance, so it’s important that we get proactive in how we support our clients to better understand and manage their risks.
We know change is coming, and we’re ready for it. At industry level, we’re already talking about ways we can help people become more resilient to natural disasters. Our ability to offer the protection that modern society relies on, depends on it. We’ve all got a role to play in making the world a more sustainable place for all of us.