South Africa faces growing exposure to severe natural disasters, with annual disaster relief costs averaging R3.7 billion, 86% of which are uninsured. The latest Intergovernmental Panel on Climate Change (IPCC) report warns of increasing disaster frequency and severity due to climate change. Municipalities, at the forefront of disaster response, require effective financing strategies.

Commissioned by National Treasury and the World Bank, in collaboration with Switzerland’s State Secretariat for Economic Affairs (SECO), our study explores municipal disaster risk financing through interviews with 26 municipalities, the National Disaster Management Centre(NDMC), National Treasury, South African Local Government Association (SALGA) and the insurance industry. This report informs the implementation of the National Disaster Risk Finance Diagnostic, offering insights for local, district, and metro municipalities, with further actions needed at national and provincial levels.

Download the report: here

Our report found that insurance was largely irrelevant as a DRF instrument. Only a third of respondent municipalities claimed from insurance post-disaster despite all being insured. Small amounts were claimed relative to the cost of the disasters, claims took a long time to pay out and in many cases, claims were not possible given limited compliance with the policies in place and related disputes. In most cases, municipalities didn’t understand the nature of their policies, and insurers had very little information to go on to underwrite the risks covered. Insurance also does not cover any assets in the open, including most roads, bridges, dams, and network assets.

As a follow-up to the above report we held two ideation working sessions with the insurance industry and broader stakeholders to identify options to better leverage insurance for disaster risk management and response, in collaboration with the World Bank, National Treasury, SECO and the BER. The key findings are shared below.