"Climate change is increasingly impacting Africa, with rising temperatures, shifting rainfall patterns and more frequent extreme weather events such as droughts, floods, and cyclones.," says Leslie Muthen, Head of Territory for Africa at insurance software provider SSP Worldwide. "These changes pose significant challenges to the insurance industry, which must adapt to manage escalating risks and ensure financial resilience."

The frequency and severity of climate-related disasters are on the rise. In 2024, global economic losses from natural disasters reached $318 billion, with insured losses accounting for $145 billion – a nearly 6% increase from the previous year.

In Africa, the situation is particularly acute. For instance, Cyclone Idai in 2019 caused significant damage across Mozambique, Malawi and Zimbabwe, yet only 7% of the estimated $2 billion in losses was insured.

Moreover, climate change has reduced agricultural productivity growth in Africa by 34% since 1961, threatening food security and livelihoods.

"These developments underscore the urgent need for the insurance sector to enhance its capacity to assess, price and manage climate-related risks effectively," says Muthen.

To navigate the complexities introduced by climate change, insurers must ensure that they leverage advanced policy administration systems (PAS) that offer:

    Real-time data processing: Enabling rapid assessment and response to emerging risks.
    Scalability and flexibility: Allowing insurers to adapt to changing regulatory environments and customer needs.
    Integration capabilities: Facilitating seamless interaction with third-party data sources and analytical tools.
    Enhanced customer engagement: Providing personalized services and swift claims processing to meet heightened customer expectations.

"Implementing such systems is crucial for insurers aiming to maintain competitiveness and fulfil their role in promoting economic stability amid climate uncertainties," says Muthen.

As climate change continues to reshape risk landscapes across Africa, the insurance industry must evolve accordingly.

"Investing in modern, adaptable policy administration systems is a strategic necessity," says Muthen. "By doing so, insurers can enhance their resilience, better serve their clients and contribute to the broader goal of sustainable development in the face of environmental challenges."