South African insurers are finding ways to 'future-proof' themselves as climate change alters the landscape of the industry, according to Rudolf Britz, chief actuary at Momentum Insure.
Britz said over the medium term, the local insurance industry was in a difficult spot after experiencing significant losses including the social unrest in 2021.
“It started with the severe flooding in KwaZulu-Natal, we had the riots in KwaZulu-Natal, and we have had weather events,” he said.
It seems like the bulk of events are damaging public infrastructure and it is hitting the poorest of the poor and unfortunately that market segment is not insured. From an insurance perspective, it is not hitting insurers that badly at the moment
— Rudolf Britz, chief actuary at Momentum Insure
The looting and riots during the social unrest in 2021 in KwaZulu-Natal and Gauteng cost the economy more than R50bn while R15bn in insurance claims covered damages as a result of floods in KwaZulu-Natal a year later.
South Africa is not immune to climate change disasters, with increased hailstorms, flooding and prolonged droughts, said Britz.
“On climate change, let me say it is the real thing. Over the past 80 or so years we have seen the average temperatures experienced in any geography increasing by anything between 1°C and 1.5°C, that means climate change is happening,” said Britz.
Despite the shifts in weather patterns, insurers were less affected by weather events over the past 12 months, Britz said.
He said the flooding in the Eastern Cape two weeks ago and the cold front and flooding in the Western Cape have not affected the industry that much.
“It seems like the bulk of those events are damaging public infrastructure and it is hitting the poorest of the poor and unfortunately that market segment is not insured. From an insurance perspective, it is not hitting insurers that badly at the moment,” he said.
In June a flood as a result of a cold front that brought strong winds and torrential rains ravaged Mthatha, Eastern Cape, resulting in more than 100 deaths.
Britz said in addition to floods, fires were a big issue for insurers, citing the January 2025 Los Angeles wildfires where insured losses were estimated at more than $40bn (R704.27bn).
“If you think globally, the California wildfires were the worst event ever recorded in the reinsurance market in the US when it comes to fires,” he said.
“That was a really bad event. What made it worse was that a large proportion of that Los Angeles base was not insured even though they should have been, but they opted not to take out insurance because it is too expensive.
“In South Africa, the largest fires happened when a part of the Knysna forest burnt down. That is the kind of thing we are concerned about. We often see fires in, let's call it 'ungoverned game reserves', where there are no proper fire breaks provided for in areas where there is a concentration of thatched roofs, so a fire jumps easily.”
Santam's biennial report on trends in insurance released last month said:
- 66% of consumers were concerned about rising living costs;
- 50% were worried about crime; and
- 47% cited burglary, mugging and hijackings.
It said weather volatility, infrastructure concerns and socio-economic challenges have created a tough environment for local insurers. The report said for motor and heavy haulage, the ongoing geopolitical turmoil has changed trade routes and impacted the cost of insurance.
“A trend is emerging where vehicles that normally wouldn’t be written off are being declared total losses because repair costs have skyrocketed due to costly imported parts affected by the geopolitical environment,” said the report.
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