New insurance insights reveal storms as top threat to SA enterprises

According to a five-year insurance insights report from Standard Insurance Limited, extreme weather now outpaces theft and fire as leading business risk.

A newly released five-year insurance insights report from Standard Insurance Limited reveals a dramatic shift in South Africa’s business risk landscape: storms and other extreme weather events have overtaken theft, fire, and accidental damage as the leading cause of short-term insurance claims.

The report signals a new era of climate-linked volatility, where environmental shocks are no longer seasonal anomalies but systemic threats to business continuity and national economic stability.

“Across the five-year period ending 2024, claims that occurred in 2022 made up 27% of the total claims value. Additionally, weather related claims such as storm, hail and floods accounted for 41% of the total claims value in that year alone,” says Riaz Mia, Chief Operating Officer at Standard Insurance Limited.

“While fire incidents were less frequent, they carried the highest financial impact, with some commercial fire losses reaching up to R183 million.”

While it may be challenging to predict when extreme weather events will strike, regional data from Standard Insurance Limited shows that the kind of climate events we are prone to experience, are increasingly patterned – from hailstorms in Gauteng to flooding in KwaZulu-Natal and wildfires in the Western Cape.

“As an insurer that advocates for business continuity, this report – produced in partnership with our Standard Bank Group climate and equity research teams – offers climate risk insights to help businesses prepare better, build resilience and ensure swift recovery in times of disaster,” explains Mia.

“We want businesses to see insurers as more than financial responders but rather as strategic partners in this evolving risk landscape. We are partners in protecting what matters most.”

Dr Penny Byrne, Head of Climate Change Research at Standard Bank Securities says that South Africa’s climate story is unfolding faster than many anticipated, and the insurance industry is feeling the effects in every claim cycle.

The reality is that emissions are increasing, and global average temperatures alongside. As the world warms, extreme weather events become more frequent and intense,” Byrne explains. “As extreme events become more commonplace, we revisit the question of how the risks change and count the huge cost associated with these events.”

Head of Commercial Insurance at Standard Insurance Limited, Dini Nondumo says risk is no longer random. Businesses need to evolve from only thinking about insurance merely as a reactive safety net and more of a strategic partner that helps protect operations, infrastructure, and financial continuity.

The 2022 KZN floods alone caused R62.3 billion in losses, with only R32 billion insured. Over 31,000 jobs were lost, underscoring how uninsured shocks leave deep economic scars.

“Short-term insurance is emerging as a critical pillar of economic resilience as it injects liquidity, enables recovery, and restores investor confidence after shocks,” says Nondumo.

A R4.5 billion flood damage lawsuit, by one of the biggest motoring companies in South Africa, following municipal stormwater failures, highlights how poor infrastructure can turn insured events into uninsured crises.

Even businesses with robust insurance coverage can experience extended disruptions if public systems aren’t equally resilient. A truly secure future depends on the strength of every link in the chain.

Johan van Greuning, Head of Standard Insurance Limited, says that in a country where unemployment hovers around 33%, businesses are vital job creators.

“Yet, without insurance, a single fire or flood can mean permanent closure, triggering job losses and supply chain disruption,” says Greuning.

“Insurers cannot close the protection gap alone. Joint investments with government in infrastructure resilience, education, and inclusive insurance products are vital to safeguard business continuity and national stability.”

Standard Bank urges South African business leaders to integrate Short-term Insurance into strategic planning – conducting climate vulnerability assessments, reviewing policy adequacy, and using claims data to guide capital allocation.

The South African Prudential Authority (PA) has formally initiated the integration of climate-related risks into its regulatory and supervisory framework. In May 2024, the PA issued a guidance notice titled “Climate-related Governance and Risk Practices for Insurers”, outlining approaches insurers should adopt to manage climate-related exposures.

This marks a pivotal shift in how the industry must respond. The pace and unpredictability of climate-related events are challenging traditional actuarial models. If businesses underestimate their exposure, they risk catastrophic losses that could destabilise entire sectors.

Reinsurers also play a vital role in this evolving landscape – offering capital, global insights, and technical expertise to help insurers navigate uncertainty and build resilience across portfolios.

Insights for financial advisers

As climate risks redefine the business landscape in South Africa, financial advisers have a critical role in guiding clients toward resilience and strategic financial planning. Below are key takeaways from the report to empower your advisory approach:

1. Highlight the growing impact of climate risks

• Insight: Storms and extreme weather are now the leading cause of short-term insurance claims, overtaking theft and fire.
• Action for advisers: Emphasise the importance of climate risk insurance as a core component of a client’s financial safety plan. Ensure clients understand how climate-linked events impact their business and personal financial stability.

2. Stress the urgency of adequate coverage

• Stat to emphasise: In the 2022 KwaZulu-Natal floods, losses reached R62.3 billion, yet only R32 billion was insured.
• Advisory tip: Conduct comprehensive insurance coverage audits for your clients. Ensure their policies match the scale of potential financial threats.

3. Position insurance as a strategic tool

• Insight: Challenges from infrastructure gaps and extreme weather amplify risks for even well-insured businesses.
• Action for advisers: Encourage businesses to view insurance not as a reactive expense but as a strategic partner. Collaborate with clients on climate vulnerability assessments and long-term risk management strategies.

4. Use regulatory shifts as a value proposition

• Insight: With the South African Prudential Authority’s 2024 guidance on climate-related risk governance, insurers and businesses will need better alignment.
• Opportunity: Help clients stay ahead by aligning their risk strategies with emerging regulatory frameworks. Demonstrate the value of compliance in improving access to financing and partnerships.

5. Strengthen resilience investments

• Insight: Extreme weather can destabilise entire supply chains, even for insured entities.
• Action for advisers: Advocate for joint investment approaches with clients – combining infrastructure resilience enhancements and diversified insurance portfolios. Provide data-backed insights for allocating capital improvements effectively.

6. Bridge the protection gap

• Insight: Many businesses remain underinsured or uninsured, leaving them vulnerable to catastrophic losses.
• Action for advisers: Showcase inclusive insurance solutions to SMEs and high-risk sectors. Leverage reinsurer expertise and tools to identify affordability gaps and position your firm as a forward-thinking partner.