The National Treasury has announced that it will undertake a pilot, along with municipalities, by the end of the third quarter of 2025, to determine the structure and pricing of potential insurance products to cover disaster risks.
To this purpose, the National Treasury has released two documents on enhancing South Africa’s approach to disaster risk insurance by better using private-sector participation.
The documents outline: (i) a disaster risk strategy; and (ii) a survey of municipalities’ experience of managing disaster risk. Summaries of these documents appeared in the 2025 Budget Review.
In a statement, the National Treasury said, “While property insurance is widely available in South Africa, and while the most comprehensive policies cover natural disaster risk (including earthquake, strong wind, flood, hailstorm, landslide, and subsidence), policies are tailored to and bought by middle- and upper-income households. This is indicative of trends for other insurance products, including agriculture insurance, which is currently available only to commercial farmers. Most public infrastructure is uninsured, placing a large contingent liability on the government.”
Large cities
The statement added, “While some large municipalities, such as Cape Town and eThekwini, have municipal insurance pools, the amount of cover offered tends to be limited due to poor data quality and poor asset maintenance records. There is a significant opportunity to build on these facilities to increase asset cover and expand cover to important public infrastructure. The non-life insurance markets in South Africa present a viable opportunity for South Africa to better manage risk by transferring key risks off budget.”
Next steps
The next steps in the process will be an engagement between the government and the insurance sector on the potential for insurance, particularly parametric insurance, to improve South Africa’s approach to disaster risk. Parametric insurance is increasingly used by governments, municipalities and households to insure against climate-related risk.