Africa’s insurance industry has been challenged to play a proactive role in addressing the climate change agenda.
Speaking at the Africa Insurance Organization Annual Conference, General Assembly in Nairobi, director School of Pension and Retirement Studies Edward Odundo, underscored the need for climate change provisions in Environmental, Social and Governance, ESG, risk assessment.
"The risks posed by the rising global temperatures cut across all sectors including the insurance industry,"Odundo said.
He added that the increasing frequency and intensity of disasters relating to flooding, drought and other climate change-induced disasters has a direct impact on the insurers business.
He urged the insurance industry to be at the forefront in pushing for sustainable business practices across all sectors.
"Players in the industry should proactively assess the climate risk element associated with their business decisions. You should invest in sound policies that are aligned to the walk towards achieving net zero temperature commitment,” he said.
This, he said, will be achieved through adopting rigorous investment screening procedures for climate specific and ESG risks.
Insurers have been urged to develop products targeting the emerging international climate finance flows, demand for carbon credits and the new green economy opportunities.
A recent report by the Intergovernmental Panel on Climate Change (IPCC) predicts an apocalyptic future by the end of this century if the current indiscriminate production of global greenhouse gas emissions continues.
The report indicates that despite contributing the least amount of greenhouse gas emissions, Africa will be the most exposed to climate change impact. On average, the continent experiences one to three heat waves per year, however, this number could double by 2050.
In Kenya, for example, it has become commonplace for pastoralist communities in arid and semi-arid regions to face starvation and even death due to severe and increasingly frequent droughts that depletes pastures and water sources for both livestock and human consumption.
The Africa Risk Capacity, since its inception in 2012 has paid over $100 million (Sh11.5 billion) in claims to governments to assist them to respond to disasters .
Currently, they are providing insurance to over 30 million Africans every single year, with a target of 200 million in the next five years.
Kenya, which had taken up a cover between 2015 to 2017, no longer pays premiums despite having completed a national disaster management plan.
All the other East African countries are not members of ARC.
ARC continues to be active in Kenya by providing reinsurance to the Kenya Livestock Insurance Programme and through its partnership with Pula, an insurtech in the agricultural insurance arena.