Clive Hogarth, Head of Retail Pricing at Old Mutual Insure

South Africa’s non-life insurance industry is undergoing a fundamental shift as climate risks intensify and the cost of natural disasters rises, forcing insurers to rethink how they measure exposure, price risk, and support resilience.

According to Clive Hogarth, Head of Retail Pricing at Old Mutual Insure, the sector is increasingly moving away from traditional models and toward more sophisticated, climate-aligned approaches that reflect the realities of a world experiencing the effects of global warming.

Hogarth says that the rising frequency of floods, wildfires, hailstorms, and droughts is already reshaping the industry’s operations and business models.

“Many in the South African insurance industry have invested significantly in climate risk modelling, driven by the increasing frequency and severity of weather-related events. As such, we have evolved our pricing models to incorporate climate risks through sophisticated spatial analytics,” Hogarth explains.

He adds that this change became unavoidable after events such as the 2022 KwaZulu-Natal floods and the 2018 St Francis Bay fires, where devastating losses occurred in pockets just a few kilometres wide.

“Flooding and wildfire exposure can vary dramatically within the same suburb, so to price accurately, we must understand the exact location and its risk dynamics,” Hogarth notes.

Insurers have also had to adjust their pricing to reflect this new environment. Higher-risk areas now face premiums aligned with their increased exposure, while reinsurers have raised their own rates, which flow through to end-users.

Hogarth notes that Old Mutual Insure has partnerships with specialist data providers and researchers to strengthen its climate insight. “We collaborate with multiple third-party data providers to understand natural perils across South Africa. The CSIR’s Green Book, for example, offers vital long-term municipal risk projections,” he says.

“To help address the growing challenges of climate change, we’ve partnered with the Actuarial Society of South Africa (ASSA) to launch the South African Climate Index,” says Hogarth. “This innovative tool gives everyone a systematic, data-driven way to track and quantify extreme weather events across the country. It is a critical step toward improving risk assessment and building resilience in our industry; however it should be noted that the industry still faces structural constraints

“There’s a lack of a national address database and limited Africa-specific catastrophe models,” Hogarth says.

With South Africa’s climate risks varying widely region by region, tailored responses are essential. Hogarth says risk-based pricing must be supported by local risk-mitigation strategies.

However, Hogarth cautions that insurers cannot carry the burden of climate resilience alone. “The non-life insurance sector represents just 3% of GDP (gross domestic product) and under 10% of the government’s yearly expenditure. While the industry contributes to resilience, infrastructure upgrades require the scale of resources that only the state can provide.”

He believes public-private collaboration is essential for improving early warning systems, upgrading vulnerable infrastructure, and supporting community-level resilience.

Engaging policyholders is another critical area. Hogarth argues that insurers need to communicate more effectively about risk and how customers can reduce their exposure.

“Most policyholders don’t understand how their behaviour or home features influence their premiums. Thatch homes, for example, carry far higher fire risk, but many customers aren’t aware of mitigation options,” Hogarth notes.

Product innovation is also accelerating. Some insurers are creating simplified, lower-cost products that focus on essential cover for underserved communities. “For example, basic fire protection combined with detection technology can keep premiums affordable,” Hogarth says. “Digital distribution also helps reduce costs even further,” he adds.

Hogarth highlights parametric insurance as another emerging tool, where claims are triggered automatically by a weather index rather than individual loss assessments. “It won’t always match total losses, but it offers fast, transparent relief in high-risk environments,” he explains.

Balancing affordability and sustainability remains one of the industry’s biggest long-term challenges. “As natural peril costs increase, premium adjustments are necessary to maintain solvency,” Hogarth says.

Product changes can moderate premium increases but often reduce coverage, shifting more financial risk onto households. However, Hogarth notes that there is also significant scope for insurers to help customers make climate-conscious decisions at the claims stage, such as opting for solar geysers or energy-efficient replacements.

Hogarth adds that the urgency cannot be overstated. “We are the first generation to feel the impact of climate change and the last generation that can do something about it,” he warns, echoing Barack Obama’s address to the United Nations Climate Change Summit.

It is expected that 2025 will set new global temperature records and bring more extreme weather at home, and Hogarth believes that only collaboration between individuals, businesses, and the state will safeguard South Africa’s climate future.

“The insurance industry can support resilience, but we cannot solve these challenges alone,” he says.