South Africa is exploring whether its major cities should adopt flood insurance to better cope with the growing cost of climate disasters.
As reported by Mybroadband, the move follows several years of catastrophic floods that forced the government to divert funds from essential services to cover recovery costs.
The insurance being considered is parametric – a type of coverage that pays out automatically when a specific trigger, such as extreme rainfall, is reached. Unlike traditional insurance, it doesn’t require a damage assessment, meaning payouts arrive faster when disasters strike.
New plan for high-risk cities?
Recent years of damaging floods have underscored the urgency of the discussion, including the 2022 KZN floods, when torrential rains killed at least 459 people in Durban and damaged critical infrastructure.
Another example of this would be when Cape Town recorded excessive rainfall in July last year, and tens of thousands of homes were damaged.
“The cost of disasters, both climate-related and other, has risen significantly over the past several years,” South Africa’s National Treasury said in a report released Friday.
It noted that disaster relief often comes at the expense of key services like education, health, and safety.
To explore parametric insurance as part of a wider disaster risk mitigation strategy, the Treasury has partnered with the World Bank. AXA Climate, a division of France’s AXA SA, has been commissioned to conduct the study. If implemented, legislative changes would be required to support the new insurance model.
Were you affected by any floods over the past few years in South Africa?
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