The African Climate Foundation (ACF), in collaboration with Krutham and in consultation with a range of experts, will this week launch “Scaling Insurance for Climate Resilience in Africa”. The ACF commissioned this series of country-focused reports to: (i) better understand the role the insurance sector could play in adaptation and resilience in Africa, and (ii) inform its ongoing work on establishing Adaptation and Resilience Platforms (ARIPs) in pilot African countries.
The reports focus on Malawi, Kenya and South Africa. The analysis is based on extensive interviews with various insurance experts, desktop research and insights from peer reviews and panel discussions by insurance industry leads. Furthermore, by exploring the role of insurance in three countries with very different levels of insurance market development, economic development and climate risk management strategies, the reports aim to support conversations on how to scale insurance for climate resilience across the continent.
The African continent faces significant challenges in managing the consequences of climate change, according to the World Meteorological Organisation, especially as both average temperatures and sea levels rise faster than global averages. As the frequency and intensity of extreme weather events increase, it is imperative to consider how African countries can both reduce their climate vulnerabilities (through adaptation measures) and improve their capabilities to manage residual climate risks. Unfortunately, both of these strategies face significant implementation and funding challenges.
The UNEP 2024 Adaptation Gap Report highlights that African countries’ adaptation finance needs are estimated at $61 billion per year (based on NDCs and NAPs), while the international public adaptation finance flows to Africa reached only $13 billion in 2022. The report also highlights that debt instruments (standard loans) are the most common means for adaptation finance. African countries’ pre-existing economic vulnerabilities and limited fiscal space undermine their efforts to close this gap. With absent adaptation measures, climate change is expected to continue eroding their fiscal space, as well as affecting the lives and livelihoods of millions of people. The African Development Bank estimates that the continent is losing between 5 and 15 per cent of its GDP per capita growth due to climate change and related impacts. One strategy to help address this vicious circle is to transfer some of the risks stemming from climate change to the insurance sector.
In this context, the reports assess the potential of the insurance sector to further support the management of climate risks. The series provides evidence-based analysis of critical success factors and market development opportunities, practical solutions for expanding insurance access to low-income populations, considerations around preserving the safety and soundness of insurance and reinsurance companies, and the potential for public-private partnerships to strategically enhance climate resilience. This includes discussions on the pathways to scaling the role of insurance through social protection schemes, national adaptation and disaster risk management strategies, agricultural programmes, and digital and mobile money solutions – while taking into account the specific circumstances of each country.
Following the launch of these reports, the ACF intends to work with the relevant governments and further engage the insurance industry in order to explore the possibility of supporting the implementation of priority recommendations, especially where a country platform model can provide the necessary coordination and technical assistance support.
View the launch of the reports on 4 December, as experts discuss the reports findings.
