By Daniel Stevens, Executive Head: Agriculture at Santam

‍Recent reports of a fifth sluice gate being opened at the Vaal Dam as water inflows surged  have renewed concerns of flooding and the risks of catastrophic climate related events. In September 2023 floods across the Western Cape triggered devastating damage that saw roads washed away, electricity cut to tens of thousands of residents, and the agricultural sector sustaining damages exceeding R1.4 billion.

As the toll of climate-related disasters rises, South African businesses need to take heed and strengthen their resilience. This Earth Day’s theme, Our Power, Our Planet, is a call to action. Not just for governments or global institutions, but for every business and community affected by our changing climate. The power to adapt, to plan, and to build a more resilient future lies with us.

At the heart of building resilience is understanding risk. Climate change may be a global challenge, but preparing for extreme weather events means looking closely at where and how a business operates. Insurance plays a unique role here in how it helps quantify and price risk in the first place. South Africa’s short-term insurance industry has long had to account for weather volatility but today, the industry has advanced to meet new extremes.

At its core, short-term insurance helps businesses create a safety net that enables recovery after natural and extreme weather events. Now, we can geocode client addresses to enable precise peril assessment at individual property locations. This helps ensure that we price climate-related risks accurately and fairly and enables us to sustain cover into the future.

Insurance alone isn’t enough

Adaptation strategies are becoming essential across sectors. For farmers, this might mean planting more drought-tolerant crops or using climate forecasts to guide planting decisions. For industrial operations, it could mean investing in more resilient infrastructure or switching to renewable energy, which brings both environmental and financial benefits.

One area seeing real innovation is agriculture. Given its vulnerability to climate shifts, the sector is at the forefront of both risk and adaptation. Santam Agriculture offers both named peril and multi-peril crop insurance that covers the main risks affecting agricultural production, including drought, floods, hail, and frost,” says Stevens. We also provide our agri clients with seasonal climate outlook, that allows them to make informed operational decisions.

Businesses don’t operate in isolation. They depend on functioning municipalities, infrastructure, and communities which is why building broader societal resilience is increasingly becoming part of the equation.

Our flagship programme, Partnering for Risk and Resilience (P4RR), supports over 100 municipalities with early warning systems and proactive risk management strategies. Through our partnership with the Council for Scientific and Industrial Research (CSIR), we also assist municipalities in developing climate change adaptation plans using data from the GreenBook, an online tool that presents scientific evidence and practical adaptation actions for South African cities and towns.

Closing the protection gap

Despite these efforts, a large portion of businesses remain uninsured or underinsured against climate-related risk. In South Africa, Swiss Re data cites the cumulative protection gap from 2014 to 2023 at 71%. A large protection gap hampers both households and the economic recovery following disasters, reducing an economy’s resilience.

According to Stevens, the drivers behind this gap include slow economic growth, decaying infrastructure, affordability constraints, and the increasing number of people living in high-risk areas. Over the past 10 years, weather-related catastrophe losses have doubled in size, occurring in an environment where we’re not seeing the continued uptake of insurance.

Still, there’s cause for optimism. As more businesses recognise climate risk as a present reality, interest in proactive risk management is growing. The journey of capacitating our clients to better prepare for climate-related risks is progressing and will mature as the business also matures its response to climate change.