The Rising Threat of Climate Change

A January 2024 article published by the University of KwaZulu-Natal suggests that South Africa has seen a 60% increase in extreme weather events over the past two decades. With extreme weather events like floods, droughts, and storms becoming increasingly common, the South African Weather Service (SAWS) recently highlighted the public’s struggle to interpret weather warning levels, which results in loss of property and lives.

Funeka Ngewu, Executive Head of Claims & Procurement at Momentum Insure says this has a direct impact on insurance – an industry working hard to understand the changing nature of weather risk and how to protect people from unexpected loss.  

Insights from Deloitte’s 2025 global insurance outlook: Evolving industry operating models to build the future of insurance, revealed that in 2023, global economic losses due to natural catastrophes reached approximately $357 billion. Only 35% of these losses were insured, leaving a protection gap of around 65%. The data found this gap to be particularly large in Africa. Ngewu cites this as a primary reason the insurance industry must continue to evolve.

“The increasing frequency of climate-related incidents has forced the insurance industry to re-think how it understands and assesses risk, to firstly provide cover that is more reliable, accessible and resilient and secondly, to maintain trust with the clients it serves,” said Ngewu.

She added that South Africa’s insurance sector is under increasing pressure to comply with guidelines promoting sustainable underwriting and disaster recovery. “Adjusting premiums, refining cover options to reflect the heightened risks, and ensuring we remain accessible to those clients most affected, creates a complex environment for insurers,” Ngewu said.  

Harnessing data for better risk management

Insurers are increasingly turning to data-driven solutions to manage climate risks. Vast datasets and AI-driven insights are enabling the car and home insurer to better understand the likelihood of extreme events and craft underwriting policies that are both responsive and resilient.

“Data analytics allow us to forecast risks with greater accuracy, ensuring we can act pre-emptively, not reactively,” said Ngewu.

By predicting the frequency of events like severe storms or droughts, Ngewu said it is easier for the insurance industry to adjust premiums and design cover that reflects actual, and evolving risks because of the insights-led decision-making process that is being more widely utilised. She said insurers are increasingly utilising technologies like the Internet of Things (IoT), machine learning, and AI to enhance risk assessment and management.

For instance, IoT devices can monitor real-time data on weather conditions, property vulnerabilities, and even consumer behaviour.

But can the insurance industry rise to navigate an evolving regulatory landscape all while addressing the very real social impacts of climate change?

Climate change risk defined

As governments and industry bodies introduce new standards to address climate risks, the regulatory environment is also evolving.

“We rely on the regulations to shape how we operate, so we can play a leading role in both disaster recovery and risk management. The insurance sector is positioned well to foster community resilience against major climate events.”

Beyond the regulations, Ngewu believes the larger issue of uninsured South Africans presents an additional risk. With most of the population being uninsured, the financial burden of rebuilding after climate disasters often falls on the government—further straining an already overstretched public sector. “There are options to innovate, such as investment in offerings such as parametric insurance which provides specific risk cover linked to catastrophic events.

This protection gap not only hampers economic recovery but also weakens the nation’s overall resilience to future disasters,” said Ngewu.

A call to action for a resilient future

By harnessing data, embracing sustainable practices, and forging partnerships with regulators and communities, Ngewu said insurers can shift from merely reacting to disasters to driving proactive solutions that protect lives, livelihoods, and the environment.

As climate change continues to impact South Africa, the insurance industry is poised for transformation. “Insurers must redefine their role in society. This challenge is about more than just adjusting premiums; it’s about underwriting hope for a more secure future.

The industry’s response to climate change can inspire a future where insurance doesn’t just restore what’s lost but strengthens the foundation for a more secure, sustainable tomorrow,” Ngewu concluded.

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