As climate change continues to intensify across the West African subregion, insurance operators are calling for the adoption of advanced risk management tools such as geo-coding and parametric piloting in underwriting and risk pricing to better manage emerging environmental challenges.
Losses from natural disasters — including floods, droughts, heatwaves, and coastal erosion — have increasingly burdened insurers and reinsurers, with mounting claims threatening solvency and profitability across the region. The issue has become a pressing concern not only in Nigeria but also in other West African nations.
To address these growing risks, members of the West Africa Insurance Companies Association (WAICA) gathered in Nigeria for this year’s annual educational conference themed “The West African Insurer in the Face of Climate Change.” Discussions centered on strengthening resilience, refining underwriting models, and leveraging innovation to mitigate climate-induced losses.
Climate Change Now a Business Reality
In his keynote address, Mr. Wole Oshin, Group Managing Director of Custodian Group, described climate-related events as not just environmental issues but fundamental business challenges.
“Climate volatility directly affects underwriting assumptions, claims frequency, solvency margins, and reinsurance structures,” Oshin said. “It tests our risk models, strains our capital, and challenges our ability to price and transfer risk sustainably. Yet within these challenges lies opportunity — the chance to lead in resilience and innovation.”
He emphasized the need for insurers to adopt new frameworks such as parametric insurance solutions, regional risk pools, and green investment strategies, urging the industry to take a proactive leadership role in defining the region’s response to climate change.
The Human and Economic Toll
Data and reports reveal that Nigeria and other West African nations have faced severe climate impacts in recent years. In 2022, over 200 communities across Rivers, Anambra, Kogi, Bayelsa, and Delta states were displaced by devastating floods. Similar incidents in 2012, 2016, 2017, 2018, and 2020 caused widespread destruction, with little government intervention to prevent recurrence.
Beyond Nigeria, Sierra Leone suffered a catastrophic mudslide in 2017, killing more than 1,100 people in Freetown. Meanwhile, Niger and Chad experienced recurrent droughts and heatwaves that devastated crops and livestock, while Gambia and Senegal continue to battle coastal erosion and storm surges that threaten livelihoods and tourism.
“These are not abstract risks,” Oshin noted. “They affect real lives, economies, and balance sheets. Natural disasters have driven up claims, strained capital reserves, and shaken confidence in reinsurance markets.”
Building a Resilient Insurance Framework
At the conference, insurers explored ways to strengthen climate risk management through innovation and collaboration. Key resolutions included:
- Conducting parametric pilot tests before premium pricing to reduce overdependence on reinsurance.
- Using geo-coding to accurately assess the location and exposure of insured properties.
- Developing new insurance products tailored to cushion the effects of climate change.
- Ensuring timely and transparent claim payments, seen as the “trust engine” of insurance.
Participants also discussed leveraging government intervention funds and regional collaboration to enhance data availability and improve disaster response mechanisms.
Global Perspective on Regional Challenges
Former Deputy Finance Minister of Sierra Leone, Mr. Bukan Kaloko, highlighted that climate change poses a systemic risk to financial stability in West Africa.
“Despite contributing less than 4 percent of global greenhouse gas emissions, our region faces some of the most severe consequences — from droughts in the Sahel to floods in coastal cities,” Kaloko said.
He pointed out that inadequate local climate data and limited modelling capacity hinder insurers’ ability to accurately price risk and design sustainable products.
Kaloko referenced global trends, noting that in 2024, the United States is projected to incur $182.7 billion in climate-related damages, while in 2023, global insured losses exceeded $100 billion without a single catastrophic event — indicating a growing pattern of frequent, smaller but costly disasters.
He concluded that insurers must adopt a systemic risk perspective, integrating data, innovation, and regional cooperation to secure both their solvency and the future of communities they serve.
