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What Climate Disclosure Means for South African Insurers

11 June 2026

By Denver Fortuin, Chief Risk Officer Absa Insurance at Absa Group

Six months on from South African regulators putting in place a more structured approach to climate-related disclosure for insurers, expectations have begun to tighten in line with how other markets are approaching the same issue, with these risks now treated as having direct financial consequences for the sector. But while the case for doing so is clear, working through what this requires in practice will take time and will depend on the industry engaging more closely as it builds the capability to meet it.

In October last year, the Prudential Authority issued updated guidance on climate-related disclosures for insurers, grounding it more firmly in both international and domestic frameworks to align with global standards and reflect the move toward more consistent reporting, drawing on developments such as the G20’s Task Force on Climate-related Financial Disclosures and the International Financial Reporting Standards’ sustainability standards, while adapting the guidance to South Africa’s context.

The move comes from the recognition that climate change and the transition to a low-carbon, climate-resilient economy can affect the safety and soundness of financial institutions and the stability of the financial system, a reality that is particularly relevant in South Africa given its exposure to climate-related disasters such as droughts, floods, and wildfires, as well as transition risks linked to its reliance on fossil fuels for electricity, export revenues, and employment. There is broad agreement that rising global temperatures will influence the frequency and severity of weather-related events, with a growing share of natural catastrophe losses linked to these changes. For insurers, particularly those exposed to property and casualty risks, this places greater weight on how climate-related risks are assessed, priced, and managed.

At its core, the Prudential Authority expects insurers to treat climate disclosure as part of financial reporting.

Insurers are expected to show, among others, how climate risk is governed at board and management level, how it affects strategy, financial planning, and the value chain over defined time horizons, and how scenario analysis informs this. Climate risk must be integrated into existing risk management processes and firms must also quantify exposure and progress through appropriate metrics and targets, linked where relevant to remuneration, with disclosures grounded in local context and supported by internal controls.

But widescale implementation is easier said than done.

The guidance assumes insurers have access to granular, reliable climate data, yet emissions data from clients and investee companies is often incomplete, and local climate projections are still limited. Many insurers still rely on catastrophe models based on historical patterns, which do not fully capture how risks may evolve, introducing uncertainty into metrics and scenario analysis. At the same time, the skills required to interpret this information are not yet widely embedded. Much of this sits outside the traditional capabilities of many insurers, particularly smaller or newer entrants, and will require building expertise over time, whether internally or with external support. Embedding these considerations into how the business operates will also require internal change, including how boards engage and how policies and systems are structured.

These adjustments carry cost, and the ability to absorb that cost will differ across firms, and as a result, disclosures are likely to reflect varying levels of maturity, affecting consistency and comparability across the sector.

The constraints are shared, particularly where data is incomplete and capability is still developing, and progress will depend on how the industry works together to close those gaps, through closer coordination between insurers, regulators, and other stakeholders to improve the availability of usable data and bring more consistency to how climate risk is measured and disclosed – and this process cannot be deferred.

The Prudential Authority is clear that insurers are expected to begin now rather than wait for it to be legislated. Building the systems and internal capability needed for credible disclosure takes time, and it is more practical to do this steadily than under pressure. Judging by past experience with similar guidance, climate-related disclosures are likely to become mandatory, and the task now is to be ready for that.

11 June 2026

By Denver Fortuin, Chief Risk Officer Absa Insurance at Absa Group

Six months on from South African regulators putting in place a more structured approach to climate-related disclosure for insurers, expectations have begun to tighten in line with how other markets are approaching the same issue, with these risks now treated as having direct financial consequences for the sector. But while the case for doing so is clear, working through what this requires in practice will take time and will depend on the industry engaging more closely as it builds the capability to meet it.

In October last year, the Prudential Authority issued updated guidance on climate-related disclosures for insurers, grounding it more firmly in both international and domestic frameworks to align with global standards and reflect the move toward more consistent reporting, drawing on developments such as the G20’s Task Force on Climate-related Financial Disclosures and the International Financial Reporting Standards’ sustainability standards, while adapting the guidance to South Africa’s context.

The move comes from the recognition that climate change and the transition to a low-carbon, climate-resilient economy can affect the safety and soundness of financial institutions and the stability of the financial system, a reality that is particularly relevant in South Africa given its exposure to climate-related disasters such as droughts, floods, and wildfires, as well as transition risks linked to its reliance on fossil fuels for electricity, export revenues, and employment. There is broad agreement that rising global temperatures will influence the frequency and severity of weather-related events, with a growing share of natural catastrophe losses linked to these changes. For insurers, particularly those exposed to property and casualty risks, this places greater weight on how climate-related risks are assessed, priced, and managed.

At its core, the Prudential Authority expects insurers to treat climate disclosure as part of financial reporting.

Insurers are expected to show, among others, how climate risk is governed at board and management level, how it affects strategy, financial planning, and the value chain over defined time horizons, and how scenario analysis informs this. Climate risk must be integrated into existing risk management processes and firms must also quantify exposure and progress through appropriate metrics and targets, linked where relevant to remuneration, with disclosures grounded in local context and supported by internal controls.

But widescale implementation is easier said than done.

The guidance assumes insurers have access to granular, reliable climate data, yet emissions data from clients and investee companies is often incomplete, and local climate projections are still limited. Many insurers still rely on catastrophe models based on historical patterns, which do not fully capture how risks may evolve, introducing uncertainty into metrics and scenario analysis. At the same time, the skills required to interpret this information are not yet widely embedded. Much of this sits outside the traditional capabilities of many insurers, particularly smaller or newer entrants, and will require building expertise over time, whether internally or with external support. Embedding these considerations into how the business operates will also require internal change, including how boards engage and how policies and systems are structured.

These adjustments carry cost, and the ability to absorb that cost will differ across firms, and as a result, disclosures are likely to reflect varying levels of maturity, affecting consistency and comparability across the sector.

The constraints are shared, particularly where data is incomplete and capability is still developing, and progress will depend on how the industry works together to close those gaps, through closer coordination between insurers, regulators, and other stakeholders to improve the availability of usable data and bring more consistency to how climate risk is measured and disclosed – and this process cannot be deferred.

The Prudential Authority is clear that insurers are expected to begin now rather than wait for it to be legislated. Building the systems and internal capability needed for credible disclosure takes time, and it is more practical to do this steadily than under pressure. Judging by past experience with similar guidance, climate-related disclosures are likely to become mandatory, and the task now is to be ready for that.