Disaster Insurance Gets a Makeover and Treasury Wants the Private Sector In
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When disaster strikes, most public infrastructure in South Africa is uninsured, leaving taxpayers to foot the bill. But that’s about to change. National Treasury released a bold new strategy, and this time, the private sector is invited to the table.
📄 Two key documents were published:
A survey of municipalities’ experience managing disaster risk (Disaster Risk Financing Approaches: Independent Report on the Experience of South Africa Municipalities).
Both highlight the urgent need for reform. While wealthy households and commercial farmers have access to insurance, public infrastructure and vulnerable communities are left exposed. That’s a massive financial risk the government can no longer afford.
What’s the plan?
The Treasury is exploring ‘parametric insurance’, a model where payouts are triggered automatically when a disaster like a flood or drought hits, based on pre-agreed metrics. No lengthy claims process. No red tape.
This approach is already used globally to tackle climate-related risks and could offer a faster, fairer way to protect South Africa’s infrastructure.
Some cities like Cape Town and eThekwini already use municipal insurance pools, but coverage is limited. The strategy aims to expand these pilots and bring more municipalities on board.
Why it matters
If you work in local government finance, you’ll likely be involved in the pilot projects.
If you’re advising clients in insurance or risk, this opens up new business opportunities.
If you care about fiscal sustainability, this is a step towards managing off-budget risk smarter.
Next steps? Treasury and municipalities will pilot the new insurance models, including parametric insurance by the end of Q3 2025.
Want in? Keep an eye out for engagement opportunities between Treasury and the insurance sector.
