Brokers drive underwriting discipline as climate risk intensifies
It is widely accepted that the rising frequency and severity of flood and wildfire events in South Africa are influenced by climate volatility. Rising average temperatures tend to amplify the effects of established weather patterns, including the El Niño–Southern Oscillation.
Hotter, drier conditions
El Niño phases are typically associated with hotter, drier conditions across the country’s summer rainfall regions, while La Niña often brings heavier rainfall to provinces such as KwaZulu-Natal, Limpopo and Mpumalanga. The Western Cape, with its winter rainfall climate, is influenced by these weather phenomena in more complex and less predictable ways. FAnews spoke to Elite Risk Acceptances MD, Tarina Vlok, about the underwriting response to wildfire and flood losses, and the practical mitigation steps high-net-worth homeowners can take. Elite Risk Acceptances is a high-net worth insurer and subsidiary of Old Mutual Insure.
The interview kicked off with brief comments on underwriting prospects into 2026. Vlok said that Elite’s 2025 claims experience reflected benign natural catastrophe losses and soft claims inflation before warning that one never knows what the coming period has in store. It could be another 2025, or a return to the elevated loss activity seen between 2022 and 2024. “Climate volatility introduces unpredictability to our underwriting basics,” Vlok said. “In this climate it is important to be conservative when it comes to pricing and underwriting and risk acceptance.”
A common mistake is for underwriters to give in to competitive pressures, reducing renewal premiums after a favourable year, only to burn their fingers on the next mega-loss event. In an article titled Urgency for the insurance industry to align pricing with climate change dynamics, Old Mutual Insure warned against allowing short-term relief in claims experience to dilute pricing discipline, urging insurers to align premiums with underlying climate risk.
And in Brokers key to sustainable insurance, the same insurer cited the April 2022 KwaZulu-Natal floods as a stark reminder of the financial exposure from extreme weather, with local insurers and reinsurers paying out around R7.5 billion in claims for flood and landslide damage.
Essential for WC vegetation
FAnews moved the discussion to the summer wildfire experience in the Western Cape, asking whether recent wildfires stemmed from a structural shift in climate risk. “There is no doubt that the frequency and severity of wildfires, in the Western Cape and elsewhere, are on the rise,” Vlok said, with the caveat that wildfires were integral to the Western Cape’s natural vegetation. The MD complimented both provincial and private sector firefighting resources for their ongoing efforts in managing on-the-ground fire risks and rapid fire responses.
Reflecting back on South Africa’s most devastating wildfire, the Knysna fires of 2017, Vlok noted a combination of low rainfall, prolonged high temperatures and dry Berg winds for the disaster. “All the indicators show that these types of conditions will increase in frequency as climate change progresses, we are vulnerable as a province,” she said. As reported in Everything you need to know about non-life insurance in South Africa, Aon Benfield described the Knysna wildfire catastrophe as the costliest event in the country’s history, with insurer pay-outs topping USD275 million, or more than R3.5 billion in 2017 rand.
Pressed on how underwriters price for evolving fire and flood risks, Vlok said: “We are very fortunate to be part of Old Mutual Insure who have skilled actuaries that do not rely solely on historical data when pricing for these perils. They do extensive predictive modelling of flood and wildfire exposures, making use of external databases to incorporate geospatial risk mapping, catastrophe models and forward-looking climate data.” This information is combined with historical claims data to ensure resilient, sustainable underwriting decisions.
On building trust and paying claims
The reality is that insurers and reinsurers have to underwrite fire and flood perils irrespective of climate volatility. In other words, the broader climate narrative lies beyond insurers’ control, but their response through disciplined risk selection, mitigation and pricing does not. Vlok agreed, saying that insurers have to price prudently to remain on risk and to be able to pay valid claims as and when they arise. She was adamant that insurers make a real difference in the domestic economy, and encouraged stakeholders in the industry to build trust wherever possible.
This exchange opened the way for a broader discussion on how insurers and their distribution partners respond to catastrophe events. For example, brokers and insurers play a critical role not only in educating clients ahead of potential losses, but in supporting them through the recovery process once disaster strikes. “As an intermediated insurer, our role is to support brokers by responding to claims promptly and professionally, and settling all valid claims or reinstating the asset.”
Claims, especially total losses, are understandably traumatic events, which form part of the value chain that requires human empathy and connection. This is an important differentiator as the insurance sector relies more heavily on artificial intelligence and AI agents.
Prevention is better than cure
The old adage that ‘prevention is better than cure’ resonates in the underwriting world. Commenting on risk exposures in personal lines buildings, Vlok singled out maintenance as the Holy Grail of risk mitigation. A second clear win comes from individuals being accountable for their actions. “The fire services tell us that most veld fires are caused by human activity, not arson, but things like flicking a cigarette butt out of your window, or not properly dousing your braai fire, or unsafe work practices,” she said. “We should all practise proactive hazard reduction.”
Fire and flood events often result in the full loss of an insured’s home and contents. FAnews asked Elite about the longstanding issue of clients being underinsured. Common mistakes include using the municipal valuation as the buildings sum insured rather than replacement cost or simply increasing the sum by inflation each year. “Our valuation partners give us regular feedback on the matter, and their latest statistics suggest that eight-in-10 insureds are underinsured by at least 50%,” Vlok said. In this context, the insurer recommends on an independent home and contents valuation for all high-net-worth clients.
To wrap the discussion, Vlok said Elite had spent the last four years building a resilient book and did not expect to push any major underwriting changes to clients in the coming 12 months. However, the risk landscape remains dynamic, and a single mega loss event can easily alter the status quo. “The Western Cape fires are a clear reminder that we are exposed to climate driven perils,” Vlok concluded. “Homeowners can mitigate this risk by ensuring clear access for firefighters; having functioning water sources; and clearing away combustible materials.”
Writer’s thoughts:
A softer claims year can tempt brokers and insurers to ease pricing discipline, but catastrophe exposure has not gone away. Are you and your insurance partners holding the line on risk mitigation and pricing, or drifting with the cycle? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
