South Africa is studying whether some of its largest cities should take out flood insurance after a series of disasters in recent years led to bailouts from the government.
The insurance being considered is parametric, a type of cover that gets paid out when a specific event, such as a certain level of rainfall, occurs rather than reimbursing the actual loss. Because it is triggered by an event rather than an assessment, payouts are quicker.
Last year, Cape Town had record rainfall in July and tens of thousands of homes were damaged. In 2022, at least 459 people died when torrential rains hit the port city of Durban. The city of Gqeberha was also affected by devastating floods last year.
“The cost of disasters, both climate-related and other, has risen significantly over the past several years,” the National Treasury said in a paper released on Friday. “Disasters are often financed through reprioritization of money from essential services such as education, health and safety.”The use of parametric insurance would require a change in legislation, the Treasury said, adding that the study is part of a disaster risk-mitigation strategy it’s working on with the World Bank.
AXA Climate, part of France’s AXA SA, has been appointed by the World Bank to undertake the study.
In an interview last month, Mpumi Tyikwe, the chief executive officer of South Africa’s state insurer Sasria SOC Ltd., said his company planned to expand into climate-disaster insurance.
Photograph: Flooded roads in Gqeberha, South Africa, on June 10, 2025. Photo credit: Lulama Zenzile/Gallo Images/Getty Images
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