Increase in weather-related catastrophes: ways to mitigate climate change-related risks

Increase in weather-related catastrophes: ways to mitigate climate change-related risks

Just a few years ago, climate change was a far-off reality, but a marked increase in natural disasters and weather-related catastrophes points to the reality that it may be closer to home than we realise.

Disasters such as the Knysna fires of 2017, and the more recent floods and landslides in KwaZulu-Natal, had a profound effect on local residents and businesses, many of whom experienced extensive damage to their buildings, belongings and property. Within this changing risk landscape, adequate insurance will provide the relief needed to mitigate against the effects of climate change-induced extreme weather events.

In 2017, the Knysna fires blazed a path of devastation that led to the destruction of the largest number of buildings by fire in South African history. In tandem with the effects of storms in the Western Cape, during the same period, the insurance industry equated the total damage to between R3 billion and R4 billion, without taking into account damage to uninsured property. Similarly, the recent floods in parts of KwaZulu-Natal wreaked havoc to hundreds of businesses in the area.

Local businesses are particularly vulnerable to the impact of climate change. By way of example, KwaZulu-Natal’s central role in South Africa’s supply chain meant that the recent floods had a ripple effect on logistical companies, their suppliers and, ultimately, their ability to deliver goods efficiently to businesses around the country. Considering just one instance of what this meant for fresh food businesses, it’s not difficult to comprehend the knock-on effect that natural disasters and extreme weather events can have on businesses and the economy.

These examples are by no means isolated or divorced from similar occurrences on a global scale, with weather-related disasters in South Africa increasing significantly over the past two decades. Despite this, South Africans remain ill-prepared for what is still to come in terms of weather-related catastrophes and the long-term effect thereof.

Clients should therefore reassess their policies through the lens of climate change and gain a better understanding of what it means for their personal and commercial needs. Adapting to the changing risk landscape may involve obtaining more tailored cover or adding specific cover due to the multiple aspects that now need to be taken into account.

For example, weather-related incidents can cause physical damage to residential property, a business’s premises or fleet of vehicles. Beyond structural damage, there is also the risk of business interruption. Depending on your policy, this type of cover will ensure that operating expenses are covered while your business cannot operate – aspects such as gross profit, revenue and rental income fall into this category. This type of cover will also make provision for aspects such as the cost of temporarily moving to a different location if necessary.

As certain geographical regions will become more prone to natural disasters in the future, based on their location as well as the scope of the potential damage, there is no single or one-size-fits-all insurance solution. This is where it becomes crucial for clients to work alongside their advisers to identify new, emerging risks that pertain to their exact risk profile.