Climate change is no longer a 2050 problem for insurance pricing. The 2024 and 2025 catastrophe seasons, the SAM stress-test re-baselines that followed, and the increasing reinsurance hardening have already changed the actuarial maths. This article is a practitioner’s view of what is happening to premiums and cover, and why.
What the last two seasons changed
Until about 2023, climate-attributable losses were a model assumption — a stress scenario, a tail in the cat model. From 2024 onwards, in many books they are the central scenario. The KZN floods, the Cape storm cluster, the wider African heatwave-and-fire pattern, plus the ripple effects of European and US-coast cat losses on global reinsurance, have shifted the central estimate. Books that were performing comfortably are now performing inside their tolerance, and the underwriting committees know it.
The market response has been fast. Reinsurance treaty pricing on Southern African property cat business has hardened significantly across the 2024 and 2025 renewal seasons. Retentions have climbed. Aggregate cover that was routine three years ago is now scarce. None of this is news to the people inside the market; the news is how quickly it has pulled through into primary policyholder pricing.
What is happening to premiums
The headline number masks a more interesting story. On average, property premiums in cat-exposed areas in Southern Africa have risen meaningfully — high single digits to low teens in percentage terms — but the average hides a wide spread. Some risks have been re-rated by 30% or more. Some have been declined entirely. A small number have actually moved cheaper because the underwriting now has more confidence in the model.
The interesting actuarial work is in the spread, not the average. The insurers performing well are the ones that have invested in a better view of their concentration. Where do the policies actually sit? Within the cat-exposed area, are they on the slope or on the floodplain? Is the structure rated and roofed? Is there a sprinkler system? At a level of geographic and physical detail that was not in the model three years ago, the answer to “what does this risk cost” diverges from the average dramatically.
What is happening to cover
Cover is changing in ways that are easy to miss in the headline price. Three things specifically:
- Wording is tightening. Wording around concurrent causation, anti-concurrent causation, and the sequence in which a flood and a wind event must happen for both to be covered, is moving in the insurer’s favour. This is rarely visible at policy-issue stage and is very visible at claim stage.
- Sub-limits are appearing where there were none. Cover that used to be policy-limit on infrastructure or BI is now limited per cause-of-loss. The headline limit is intact; the cover that fires on a real cat event is smaller.
- Aggregate and reinstatement provisions are scarcer. A cover that pays once may not pay a second time in the same period of insurance. The way that interacts with a multi-event season is a meaningful change.
What this means for actuaries inside insurers
The actuarial response we are seeing inside well-run insurers has three parts. First, peril-by-peril modelling rather than catch-all cat factors — the climate signal differs sharply by peril, and so the actuarial response should too. Second, reinsurance optimisation as a continuous exercise rather than an annual one — the price of cover is moving fast enough that the optimum structure now changes intra-year. Third, much closer collaboration with claims — the wording and the sub-limit changes only matter if the actuarial reserving and pricing reflect them.
What this means for buyers
For corporate insurance buyers, the playbook is changing. The focus is shifting from “lowest price” to “broadest cover at acceptable price”. The buyer who took the cheapest quote in 2023 and who renewed it in 2024 is, in many cases, holding cover that will not respond to the loss they fear. The buyers we see doing well are the ones who treat the renewal as an underwriting conversation, not a price comparison: what scenarios am I worried about, and does this wording respond?
For personal lines, the issue is harder because the ratings are happening at portfolio level. The right question for a homeowner in a cat-exposed area is no longer “is my premium going up?” but “what is my insurer’s exposure to this cat zone, and how do they price retention vs reinsurance?” Those are not questions the average homeowner can answer. They are increasingly the questions that determine whether the cover will respond.
The longer-term shape
The longer-term shape of this is not a one-off premium re-rate. It is a structural shift in which categories of risk are insurable, on what terms, at what price. Some risks will become uninsurable in the commercial market and require state or pool solutions; others will become more cleanly priced than they have ever been because the actuarial work has caught up. The transition is happening faster than the public conversation acknowledges, and the insurers and reinsurers that have invested in modelling the change are, perhaps counter-intuitively, the ones writing more of the available business.
If you are scoping the actuarial work behind a property book’s climate response, our Finance Modernisation practice does this work — pricing pipelines, reinsurance optimisation, peril-by-peril modelling.