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The National Treasury has taken a major step toward strengthening South Africa’s disaster risk response by releasing two key documents aimed at improving how the country handles disaster-related financial risks. These include a national disaster risk strategy and a survey exploring how municipalities currently manage disaster risks. Both were first mentioned in the 2025 Budget Review.
Although South Africa leads other middle-income countries with its advanced insurance market, the benefits are not evenly spread. Most natural disaster insurance products are geared towards middle- and upper-income households, leaving public infrastructure and low-income communities without adequate coverage. The same pattern holds in agricultural insurance, which remains largely exclusive to commercial farmers.
“This creates a serious financial risk for government,” the Treasury notes, as much of the public infrastructure is uninsured. When disasters hit, the burden often falls on the state budget.
Some municipalities, like Cape Town and eThekwini, have already set up their own insurance pools. But the protection these provide is often limited due to weak data systems and outdated asset records. Treasury believes that existing structures can be improved and expanded to offer better cover, especially for essential public services and assets.
A promising area of focus is parametric insurance, which triggers payouts based on specific events—like a set level of rainfall during a storm—rather than waiting for damage assessments. This type of coverage is gaining traction globally and could offer quicker, more predictable support in disaster-prone regions.
As the next step, National Treasury will engage with the insurance industry to explore how such solutions can be introduced in South Africa. A pilot project involving municipalities is expected to run by the end of the third quarter of 2025, testing different insurance structures and pricing models.
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