Climate volatility is now a core financial and strategic issue for insurers across West Africa, affecting their balance sheet
Lowering it down to Nigeria, the 2022 floods cost the Nigerian insurance industry billions of Naira in gross losses.
These were the words of Group Managing Director, Custodian Investment Plc, Mr. Wole Oshin during a West African insurance conference in Lagos, with the theme, “The West African Insurer In The Face Of Climate Change”.
He disclosed that over the past decade alone, insurers in West Africa have witnessed events that were once described as “once in a century” now happening every few years.
For instance, he said that in 2022, Nigeria experienced its worst floods in a decade with 33 out of 36 states affected, over 600 people died, more than 1.4 million displaced, and critical infrastructure including roads, farms, and oil pipelines were submerged.
He stated that the West Africa insurance industry is in a time when the realities of climate change are no longer theoretical risks on an actuarial model, but living experiences reshaping insurance markets, our balance sheets, and our societies.
Speaking on the implications for underwriting, claims, solvency capital and reinsurance strategies, he stated that climate volatility directly affects underwriting assumptions, claims frequency, solvency margins, and reinsurance structures.
He said it tests our risk models, strains their capital, and challenges our ability to price, pool, and transfer risk sustainably.
Yet, within these challenges, he said lies the opportunity to lead in resilience, to innovate in risk management, and to position insurance as a key driver of adaptation and recovery.
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He said: “Across the sub region, we have witnessed climate events that once seemed extraordinary become disturbingly routine. Floods have inundated farmlands and cities, storms have destroyed infrastructure, and rising temperatures are altering health risks and economic patterns.
“For insurers, these are not just humanitarian crises, they are defining business challenges”.
He urged insurers in Wes Africa to examine how as risk managers, they can safeguard both lives and livelihoods in the face of escalating climate threats.
“Let us to explore new underwriting frameworks, parametric solutions, regional risk pools, and green investment strategies that reflect the changing climate realities of our time. Let us deliberate with openness and urgency. Let us speak not only to losses, but of leadership, not only of exposure, but of opportunity. The insurance industry in West Africa must not only survive the era of climate change, it must define it, by building the structures of resilience that our economies and communities so urgently need.
“Nigeria experienced its worst floods in 2022 since a decade, Accra Ghana in 2015 faced devastating floods combined with a petrol station explosion, killing over 150 people and exposing urban drainage weaknesses. Sierra Leone suffered a catastrophic mudslide in 2017 after heavy rains, killing more than 1,100 people and wiping out entire communities in Freetown. Niger and Chad have faced recurrent droughts and Sahelian heatwaves that devastate crops and livestock. In The Gambia and Senegal, coastal erosion and storm surge are eating away at communities, displacing families and threatening tourism assets.
“These are not abstract climate models, they are real events affecting real balance sheets. They drive claims spikes, capital strain, and reinsurance market skepticism. The question we must ask is are we adapting underwriting, claims, solvency capital, and reinsurance strategies to remain relevant, resilient, and profitable in this era of climate change and volatility? As the risk profile intensifies, the balance sheets of Insurers are negatively impacted leading to: More frequent coastal floods in Lagos, Port Harcourt, Cotonou, and Dakar. We witnessed heavy downpour in Lagos in the last couple of weeks with huge consequences.
Addressing the underwriting, claims, solvency, and reinsurance strategies, Oshin called for proper underwriting, noting that in Lagos, underwriters can use Lekki elevation data to distinguish between lagoon-front, mid-estate, and inland plots.
He said insurers should also settle more claims to eliminate public trust deficit.
“We all know that claims are the trust engine of insurance and we must continuously improve on its delivery. There is the natural tendency to be absent and not visible when catastrophes occur, thereby missing major headline news opportunities to show the world we care.
“After the 2015 Accra floods and similar incidents in Nigeria, they delayed claims settlement led to a public trust deficit that still lingers and which must be managed. You will agree with me that fast, transparent claims settlement builds credibility. Here are some examples of how this was dealt with in the past:
“There is also the issue of solvency capital. The reality is that capital matters more now than ever before. Risks have become very unpredictable and in some instances defy modelling. The 2022 floods cost the Nigerian insurance industry billions of naira in gross losses. Many had underestimated tail scenarios and over-relied on reinsurance, only to face delayed recoveries and liquidity crunches.
“Climate volatility is here, and may intensify. Our customers, our cities, our economies are looking to us not just for indemnity, but for reliability. If we combine disciplined underwriting, visible and empathetic claims, strong capital, and innovative reinsurance, we can transform today’s challenge into a leadership opportunity for West African insurance. Let us be the insurers who show up when the rain is falling, and the ones who stay to help rebuild when the skies clear. Let us be data-driven, community-minded, and future-ready”, Oshin submitted.
