Insurers have traditionally relied on historical trends to underwrite risks and in order to price products. What was a comparatively benign weather-related catastrophe environment a year ago has moved into an elevated phase, with the frequency and severity of floods, storms and wildfires all rising.
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Weather-related catastrophes became the largest force on short-term insurance claims costs in the first half of 2026, marking a clear shift in the short-term insurance risk landscape, said PSG Insure CEO, Cedric Masondo.
He said Friday that what was a comparatively benign catastrophe environment a year ago had moved into an elevated phase, with the frequency and severity of floods, storms, and wildfires all rising. Insurers had responded by rebuilding pricing models around spatial analytics and geocoded climate risk.
“The effect extends beyond the short-term sector – actuarial bodies have begun framing extreme heat, flooding, and air pollution as health risks as well, broadening long-term exposure across life, health, and disability portfolios,” he said.
While weather was the defining claim theme of 2026 so far, motor remained the highest-volume claims category. “Accident frequency far exceeds theft and hijacking, supported by road usage returning to pre-pandemic levels as employers implement return-to-office mandates,” he said.
The more significant development, however, was on severity. Insurers report a growing tendency for vehicles to be written off after accidents that would previously have been repaired, driven by steep increases in repair costs.
Imported parts, exposure to global supply-chain disruption, and currency volatility all feed into higher average claim values. Behind these headline risks sat deeper structural drivers that were reinforcing one another.
“Climate change is raising catastrophe losses, ageing infrastructure is increasing property and business-interruption claims, and claims inflation – driven by materials, labour, and imported costs – is pushing up the price of every claim. At the same time, a hardening reinsurance market is increasing the share of losses insurers retain, amplifying the impact of each event on the local market,” he said.
The cumulative result was an expanding protection gap – the difference between economic and insured losses – which in South Africa, Masondo said, continues to widen even as the global gap has narrowed, and which falls most heavily on lower-income households.
Looking ahead to the second half of the year, several risks are expected to intensify, said Masondo. Weather was the first to watch. The coming months include the Cape winter storm season, followed by conditions that raise veld-fire risk and the start of the convective storm and hail season.
The expected transition from a wet La Niña to a drier El Niño summer adds drought stress and heightens fire risk.
Daniel Stevens, executive head of agriculture at the leading short-term insurance firm Santam, said recently that over the past 10 years, weather-related catastrophe losses have doubled in size, occurring in an environment where the continued uptake of insurance has not continued.
He said insurance alone isn’t enough for businesses to address climate-related disaster risk. Adaptation strategies are becoming essential across sectors. For farmers, it might mean planting more drought-tolerant crops, or for industrial operations, it could mean investing in more resilient infrastructure or switching to renewable energy.
Masondo said geopolitical and oil-price volatility is likely to persist even in a de-escalating conflict environment.
“War-risk repricing and supply-chain disruptions tend to outlast active hostilities, feeding into higher fuel costs, shipping delays, and broader claims inflation. For local businesses, the impact is felt through higher landed costs, input volatility, and increased uncertainty,” he said.
Another risk that was intensifying is cyber. “It is the fastest-growing exposure globally, yet insured uptake remains low in South Africa, with only around 17% of businesses carrying cyber cover. AI-driven scams and deepfakes are making attacks cheaper and more convincing, while many businesses and individuals remain underprepared,” he said.
He said the response by businesses to these risks was a consistent set of practical steps. Sums insured should be reviewed annually rather than rolled over, as building and repair costs have risen sharply.
Policyholders should declare what has changed, including solar installations, battery systems, new equipment, or shifts in turnover, as undeclared changes may not be covered. Equally important was confirming the scope of cover against the gaps that were becoming more visible: cyber, contingent and non-damage business interruption, and appropriate extensions such as SASRIA or marine and war-risk cover where relevant.
“Understanding what exclusions remove is now as important as understanding what is covered,” said Masondo. Investment in risk mitigation was also increasingly essential, he said
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