South African cities may get faster flood payouts

South Africa is considering introducing flood insurance in its major cities to better manage the rising costs of climate-related disasters.

According to MyBroadband, the government began exploring this option after years of severe flooding forced it to redirect funds from critical public services toward disaster recovery.

Officials are exploring parametric insurance, a type of policy that pays out automatically when a predetermined trigger, such as heavy rainfall, occurs. Unlike traditional insurance, it skips damage assessments, allowing for quicker payouts after disasters.

New plan for high-risk cities?

Devastating floods in recent years have highlighted the urgent need for action — most notably the 2022 KZN floods, where torrential rains killed at least 459 people in Durban and severely damaged vital infrastructure.

Another case was in July last year, when Cape Town experienced extreme rainfall that left tens of thousands of homes damaged.

“The cost of disasters, both climate-related and other, has risen significantly over the past several years,” South Africa’s National Treasury said in a report released Friday.

It noted that disaster relief often comes at the expense of key services like education, health, and safety.

To explore parametric insurance as part of a wider disaster risk mitigation strategy, the Treasury has partnered with the World Bank. AXA Climate, a division of France’s AXA SA, has been commissioned to conduct the study. If implemented, legislative changes would be required to support the new insurance model.