SA insurers hold urgent forum on climate change

30 May 2014 SAIA, IISA

South Africa’s major insurance companies together with their industry bodies, the South African Insurance Association (SAIA) and The Insurance Institute of South Africa (IISA), reinsurance experts, weather scientists and an international agricultural insurance specialist held an urgent forum to address insurance risk and exposure, due to recent extreme weather events that have caused massive damage and that had led to insurance claims of more than R1 billion in the past year.

Although there are differing views about the impact of climate change from the science community at large, insurers are questioning whether the increase in storm and hailstorm related claims are indicative of fundamental changes in global weather systems.

SAIA Chief Executive, Barry Scott, said in Sandton that 2012 and 2013 saw a dramatic increase in hail insurance claims in both the motor and property sectors. These claims were driven by severe hail storms predominantly in Gauteng. He added that crop damage due to foul weather led to massive losses over the past two years.

IISA Chief Executive, David Harpur, echoed Scott’s sentiments and added that it was necessary to hold the Forum due to the industry needing to take a forward look on its risk and exposure to weather related claims. "We can’t predict what is to happen if we don’t put our heads together and find solutions to mitigate the impact on the industry as a whole.”

International and local weather scientists, Dr Deon Terblanche, from the World Meteorological Organisation (United Nations) and Professor Stuart Piketh, from the North West University addressed the changes in the weather patterns at the forum.

"A growing and urbanizing global population, and a warming climate, imply greater exposure to extreme weather events, including hail storms. There is an urgent need for improved techniques to observe and predict these events and for the financial tools to build resilience.” said Dr Deon Terblanche.

While Professor Stuart Piketh, said, "South Africa has cutting edge infrastructure and capacity to study hail events and a rich history and body of knowledge of local hail research. The North West University is busy expanding this infrastructure and capacity to specifically meet the needs of communities interested in the impact of hailstorms as well as evaluating the trends in storm frequency and severity.”

From an insurance and claims perspective, Waldi Els, Santam Group, Regional Claims Manager said, "Our challenge is to encourage a culture of risk mitigation and risk awareness. We have to ensure that we from an industry point of view are prepared to deal with the challenges faced by such an event. I would like to share the very wise words of Charles Darwin, It is not the strongest of the species nor the most intelligent that survives, it is the one that is most adaptable to change.”

From a reinsurance perspective Pieter Visser, AON Benfield, Catastrophe Analyst said, "The hail event on 28 November 2013 caused the largest market catastrophe loss in the history of the local insurance industry estimated at R1.4 billion. The impact of the rapidly expanding urban sprawl in Gauteng combined with the increased participation of the emerging middle class in insurance are main drivers in changing the hail loss environment.”

Holger Schwarz, from the international based Agricultural Insurance Team, Munich Reinsurance, Germany said, "The International Panel on Climate Change (IPCC) assessment report no. 5 expresses low confidence in observed trends in small-scale thunderstorms (hail, gusts, tornadoes). But overall, for all parts of the world, the results are suggestive of a trend toward environments favouring more severe thunderstorms. With more humidity in the air the precondition for torrential rain and thunderstorms (having the potential for extreme hail) is fulfilled. A significant trend toward more humidity can be seen in North America, in parts of Europe, in the Eastern part of South Africa. Consequently the occurred events and severe losses in these regions in 2013 are not surprising. The South African farmers are ever more exposed to hail and other natural perils. Therefore they need a comprehensive insurance cover as a risk management tool. This can only be based on a Public-Private Partnership between the public sector, the farmers and the insurance industry.”

"The industry will assess the information shared at the forum and will decide on future engagements in this regard,” Scott said.

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