Climate change is no longer a distant concern—it’s a present-day reality, and its effects are becoming increasingly apparent. In South Africa, the country’s weather patterns have shifted dramatically, exposing businesses to new risks and challenges.
One of the most devastating reminders of these risks came in 2022 when KwaZulu-Natal (KZN) experienced catastrophic floods, resulting in over R17 billion in damages. These extreme weather events are a stark reminder that businesses must reassess their preparedness for disruptions to operations, property, and financial stability due to shifting weather patterns.
Regan Duarte, Claims Specialist at SHA Risk Specialists, highlights the importance of updating insurance coverage in response to these changes. He stresses that businesses should focus on the present-day risks posed by climate change, not outdated weather patterns from decades ago.
“Professionals and building owners need to plan for a worst-case scenario,” says Duarte, “Flood modelling should be updated to reflect what actually transpired in KZN.”
Poor Infrastructure and Maintenance Put Businesses at Risk
The tragic flooding in KZN and the Eastern Cape has revealed the vulnerability of South African infrastructure. Poor maintenance, such as clogged stormwater systems, contributed to the damage and destruction caused by heavy rains. Other provinces, like the Western Cape and Gauteng, also experienced flood damage, though to a lesser extent. In the Western Cape alone, over R1.8 billion in damages were reported from road destruction.
For businesses, the consequences of extreme weather events are severe, with operational and supply chain disruptions, damaged infrastructure, and loss of income all posing significant risks. Duarte stresses the need for the private sector to adapt, stating, “It is imperative that businesses take proactive measures to ensure their economic survival in the face of these increasingly frequent and severe weather events.”
Vulnerability in Certain Regions and the Importance of Proper Insurance
According to SHA’s claims statistics, KZN accounted for the highest number of flood-related claims in 2022 (65%), followed by Gauteng (35%), with smaller amounts of damage reported in the Eastern and Western Cape. These statistics highlight that certain regions are more prone to flooding and need proper urban planning and infrastructure to manage these risks effectively.
To mitigate the financial impact of extreme weather, businesses must incorporate flood risk management into their planning. Key insurance covers, such as Material Damage, Business Interruption, and Contractors All Risk, are essential for safeguarding against potential losses and ensuring continuity.
Claims Expose Gaps in Coverage
The construction industry has been especially impacted by weather-related damage, with claims arising from defective designs, poor planning, and lack of maintenance. Duarte notes that insurers cannot be held liable for willful negligence, which is why policies often require certain measures to mitigate risks. SHA’s data shows several claims against professional teams on construction projects, with allegations of insufficient waterproofing and inadequate drainage systems, leading to property damage.
Duarte emphasises the importance of Liability and Professional Indemnity coverage to manage these risks. “The worst situation for any business dealing with its own losses is to face litigation for third-party damages or injuries. These claims are not only stressful but can also have significant financial consequences.”
Adapting to a New Risk Environment
Given the increasing frequency of extreme weather events, both locally and globally, it is essential for businesses and property owners to take precautionary measures to protect their assets. Brokers can provide tailored advice, helping businesses identify coverage gaps and secure appropriate insurance policies to meet the current risk environment.
Duarte concludes, “Consult your broker to ensure your business is adequately prepared for current environmental threats and properly insured against relevant risks.” Taking a proactive approach will significantly improve resilience and enable businesses to recover from unforeseen losses more effectively.
By reassessing their insurance coverage and preparing for the impacts of climate change, South African businesses can better navigate the challenges posed by our changing environment.
Read more about climate change HERE
