The vulnerability of developing African nations came under the spotlight again during the humanitarian tragedy caused by Cyclone Idai. At the time of writing (31 March 2019 update) the cyclone and flooding had displaced 134,645 across Mozambique, Zimbabwe and Malawi, affected a total of 1,118,896 people, with a death toll of 820. Science is clear that climate change is causing more frequent – and more devastating – natural disasters like these.
In the Southern African context, we know society faces several challenges: Increasing local risk levels due to climate change,lack of protection in terms of limited physical and institutional infrastructure as well as a very low penetration of insurance cover. All of these taken together increases vulnerability and loss exposure for individuals, business and government.
We’ve seen the impact of this over the last few years where South Africa was hit by a series of extreme weather events, for example the prolonged drought – the worst to hit in 100 years. It affected the country in numerous ways – some predictable; others less so. For example, we could predict farmer’s harvests would be at risk. A less obvious effect was the hardening ground causing walls and floors to crack. Another impact were rising tensions and small incidents of social unrest which, if the drought was prolonged, would most likely have exponentially worsened.
It is vital that the global insurance industry takes its role as risk managers, risk carriers and investors seriously given the uncertainty we face globally in the face of rising environmental, social and governance (ESG) risk. First and foremost as an industry, we must make our contribution to narrow the risk protection gap by shifting our role to be more influential in our advice and covers that protect our customers and society at large. That’s why, as a group, Santam has chosen to play an integral part in creating the ESG guide for the global insurance industry, which was launched at the 2019 PSI (Principles for Sustainable Insurance) Allianz Event.
We know that the time to begin building the foundations for a sustainable future is now in a time of unpredictability in reflecting on what and how we underwrite the transactions in our global economy. We encourage all participants in the general insurance sector to engage with the guide which is open for public comment until 30 June 2019. The ESG guide is an opportunity to streamline information requests and build knowledge within the insurance industry, making it easier for business partners to carry out ESG due diligence on clients and transactions.
Through our role as partner, adviser and community rebuilder, the insurance sector is well positioned to play a role in helping society more resilient. Community partnerships are also vital. We’ve seen the power of these through Santam’s Partnership for Risk and Resilience (P4RR) Initiative, which equips some of the country’s most vulnerable communities through disaster management training and resources. Partnering for sustainable development is one of the global SDG goals and something all organisations should strive to do. (More information on lessons Santam and other South African corporates have learnt about Partnering for Resilience can be found here. We also need to give people the platforms to proactively innovate. The Santam Safety Ideas Challenges does just that, encouraging Insurtech and FinTech start-ups to find sustainable solves to the challenges South Africa collectively faces.
Finally, working with decision-makers is vital. Supervisors and regulators are under pressure to improve societal resilience and reduce disaster risk, and to reduce unemployment and improving poverty statistics. We need to partner with them on this journey. By helping them to better understand climate risk and the sustainable ESG solutions required, they’ll be able to set national-level targets and incentivise the activity necessary to reach these goals. We are therefore delighted that South Africa’s Prudential Authority is engaging with the industry on the Task Force for Climate-related Financial Disclosures on the physical and transition risks a changing climate implies for South Africa and the broader financial sector.
Idai has shown, once again, that the world is changing, extreme weather events are increasing, and, as a global society, we’re woefully underprepared for all their implications. As insurers, we have the responsibility to protect people’s lives. This means also protecting their homes, businesses and other assets. Ultimately, our role is to help people prepare for the worst and then rebuild once it’s over. This means joining hands and building resilience in every way we can.