IIG News

IIG Insights OMI: The Underwriting effects of Climate Change

On 25 August OMI sponsored a webinar discussing the Underwriting effects of Climate Change. The webinar was opened by the IIG’s deputy president, Thabo Twalo who pointed out that the effect of climate change is a global phenomenon. Risk underwriting and selection processes need enhancement to better manage climate-related risks.  Thabo introduced Ms Dakalo Mbuvha, our speaker for the insight session.


Dakalo Mbuvha, our subject matter expert today, is currently acting Chief Actuary at Old Mutual. In her role, Dakalo is the project lead for the company’s risk response strategy to climate change risks. She is a qualified actuary with more than 12 year’s experience across various non-life insurance reserving, capital management, risk management and pricing roles. She holds an ASSA Practising Certificate in Short Term Insurance and a Post-Graduate Diploma in Management Practise from Henley Africa Business School.

Here are some of the highlights from the discussion:

There is a significant body of evidence demonstrating extreme weather events being experienced across the globe. The evidence suggests that these extreme events are brought on by Climate Change. Global warming is a phenomenon caused by Climate Change. Global warming is brought on by human activities and has been observed since the pre-industrial period (1850-1900). The primary driver is the burning of fossil fuels, which has given rise to an increase in the global average temperature by roughly 1 degree Celsius.

The effects of Global warming, among others, has led to an increase in the severity and frequency of weather-related disasters, some examples are the UCT fires and Limpopo Floods which happened just this year in South Africa.

Climate Change is a global threat that impacts human, environmental and economic systems. The physical impact is increased damage to and loss of property. There is also the transitional impact as we move into a low carbon economy.  What becomes of property that is obsolete or is left stranded? This could result in financial risks. There is also a liability impact that speaks to claims arising from climate-related liability policies.

The impact that climate change has on the non-life insurance industry is that there has been a definite increase in catastrophic events over the last 40 years of recorded data. The last decade has seen an increase in incurred total losses. Some examples shared were the 1978 Natal Floods, the 2000 Lowveld Fire and the 2017 Knysna Fires. Africa is also warming at twice the global rate.

The challenges in the non-life insurance space are how to find ways to integrate the science into meaningful risk models. One method that was suggested was using the Pathways of global carbon dioxide emissions. This theory demonstrates what the overall effects would be if we did nothing to carbon emissions, and also what the effects of lowering emissions by 1.5 or 2 degrees respectively would result in.

Ms Dakalo suggested the following potential considerations to embed sustainable insurance principles in underwriting philosophies

  1. To embed sustainability in decision making
  2. Raise awareness of the issues
  3. Promote widespread action and
  4. Demonstrate accountability and transparency.

In the South African context, we have a high reliance on coal power generation, this is one of the considerations that need transformation.

The overall take out of this discussion was that we do need to start somewhere, together to work towards a sustainable future and a sustainable industry and encourage our staff to take action.


The article was written by Salome Van Der Mooren


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