African insurers risk underestimating their exposure to climate-related losses if they continue relying on traditional pricing and underwriting models that may no longer reflect changing weather patterns, analysts at the Carbon Trust have warned.
They said the increasing frequency and severity of floods, droughts, tropical cyclones and extreme heat could make historical claims data a less reliable basis for calculating premiums, estimating future claims and determining the capital insurers need to absorb potential losses.
The warning comes as climate-related disasters continue to affect lives and economic activities across the continent. The World Meteorological Organisation (WMO), in its State of the Climate in Africa 2025 report, said extreme weather and climate-related events affected at least 13 million people and caused more than 3,000 reported deaths across Africa in 2025.
In an analysis published in August 2026, Ikaneng Ramaipato and Tamzyn Smith, analysts at the Carbon Trust, said climate change was reshaping the operating environment for insurers by exposing households, businesses, infrastructure and public finances to changing physical and economic risks.
They noted that flooding could increase claims involving property, motor vehicles and business interruption, while prolonged drought could affect agricultural insurance portfolios, household incomes and wider economic conditions. Extreme heat could also influence life and health insurance claims through heat-related illnesses and other socioeconomic pressures.
According to the analysts, these developments are changing the risk profiles of insured assets and policyholders, making it increasingly difficult for insurers to rely solely on past claims experience when setting premiums, calculating reserves and making underwriting decisions.
They explained that climate-related risks affect insurers on both sides of their balance sheets, through the claims liabilities created by underwriting activities and the investments held to meet future obligations.
For general insurers, changing weather patterns could result in higher catastrophe losses, more volatile claims and increased pressure on reinsurance arrangements. Life and health insurers could also face changes in mortality and morbidity patterns, heat-related illnesses and climate-sensitive diseases, with implications for their long-term liabilities.
The Carbon Trust analysts said the exposure was further complicated by socioeconomic vulnerabilities across African markets, including inequality, infrastructure constraints, water stress, food insecurity and limited financial resilience.
These conditions could make it harder for households and businesses to prepare for and recover from climate-related disasters, while widening insurance protection gaps and limiting policyholders’ ability to absorb higher premiums.
They argued that climate change should be treated as a risk factor cutting across existing insurance operations rather than a separate category, as it could amplify underwriting, market, credit, liquidity and operational risks.
The analysts also warned that many insurers across African markets were yet to fully integrate climate considerations into enterprise risk management, actuarial modelling, underwriting, capital planning and their Own Risk and Solvency Assessment processes.
They identified limited access to long-term, geographically detailed climate and insurance data, shortages of expertise in climate science and actuarial modelling, and unclear responsibilities across internal departments as some of the challenges slowing progress.
Traditional actuarial models, they noted, often rely heavily on historical claims experience and assumptions that may not capture the increasing frequency, severity and uncertainty associated with climate change. This could expose insurers to mispricing and leave them more vulnerable to unexpected losses.
However, the analysts cautioned against waiting for comprehensive datasets and sophisticated quantitative models before incorporating climate risks into business decisions.
They recommended that insurers begin by identifying the climate exposures that matter most across their underwriting portfolios, investments and operations, while establishing clear responsibilities for board members and management.
They also called for the use of climate scenario analysis to assess how different climate conditions could affect insurers’ business models, underwriting portfolios and capital positions.
The analysts said insurers should progressively incorporate climate risk assessments into pricing, underwriting, capital planning, product development and strategic decisions, rather than limiting the exercise to sustainability reporting.
They added that early integration could improve risk assessment, support the development of insurance products that strengthen resilience among households and businesses, and improve engagement with regulators, investors, reinsurers and policyholders.
The Carbon Trust analysts described climate risk integration as a capability-building process rather than merely a compliance requirement, urging insurers to strengthen their governance, risk management and actuarial capabilities as weather patterns continue to change.
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