6 June 2023. ‘How is the African insurance industry responding to climate change?’ https://paepard.blogspot.com/2023/06/how-is-african-insurance-industry.html The insurance industry is exposed to the risks of climate change and that risk is increasing. Insurers should be aware of these risks and the potential impact on their business. A 2019 global survey [With Climate Impacts Growing, Insurance Companies Face Big Challenges] found that 72 percent of insurance companies believe climate change will affect their business, but 80 percent of them have not taken significant steps to lessen climate risks. Moreover, insurance companies invest the money from the premiums they collect in the financial markets. They have $582 billion invested in fossil fuels investments that could be devalued as climate risks increase. As natural disasters become more frequent and more costly, insurance companies are facing big challenges. If insurers are to weather the storms ahead, they’ll need to make some changes. The insurance industry needs to make substantial changes to deal with its own climate risks. Some of these changes could also enable insurance companies to help speed the transition to a net-zero society. Speakers Diana Castro (picture) is part of UNEP. As the Programme Supervisor of the Principles for Sustainable Insurance (PSI) initiative, Diana oversees the largest collaboration between the United Nations and the insurance industry, which has over 250 members worldwide committed to integrating Environmental, Social, and Governance risks into their decision-making. Lesley Ndlovu (picture) is currently the Chief Executive Officer of African Risk Capacity “ARC” Ltd, based in Nairobi, Kenya. Kelvin Massingham is Director of Risk and Resilience at FSD Africa, where he is responsible for driving financial market innovation in Africa to increase resilience and create pathways for green finance to flow towards a net-zero and nature-positive future.

1. How is the African
insurance industry
responding to climate
change?
6th of June 2023
A special webinar series on: Climate change
and the African financial sector

2. We welcome you to our webinar
2
McKinsey & Company
Marina Finken
Head of the Making Finance Work for Africa initiative
David Ashiagbor
Chief Financial Sector Strategy Officer at the African
Development Bank Group

3. Rules for the webinar
The duration of today's webinar is 90 minutes, including questions and
answers
For better listening comfort, all participant microphones will be disabled for
the duration of the webinar
Questions can be submitted via "Q&A“, or by raising hand.
Simultaneous translation will be available in EN/FR/EN
Slides and a recording of this presentation will be circulated to registered
participants within 72-hours following the webinar - They will also be available
on MFW4A.ORG.
Send a message to the organizers if you encounter technical problems
Do not forget to complete the questionnaire which will automatically appear on
your browser at the end of the session

4. Session outline: Times listed are GMT
4
Topic Facilitator Duration
Climate change: How is the African
insurance industry responding to
climate change ?
Diana Diaz, UNEP FI 11:10 – 11:30
Introduction Marina Finken, MFW4A
David Ashiagbor, AFDB
11:00 – 11:10
Closure Marina Finken, MFW4A 12:25 – 12:30
Panel discussion Moderator:
Marina Finken, MFW4A
Panelist:
• Diana Chepng’eno, UNEP FI
• Kelvin Massingham, FSDA
• Lesley Ndlovu, ARC
11:30 – 12:05
Q&A Marina Finken, MFW4A 12:05 – 12:25

5. Agenda
Climate change: How is the African insurance industry responding to climate change?
Panel discussion
Closure

6. 6
McKinsey & Company
Diana Diaz,
Programme Supervisor, PSI, UNEP FI
Climate change: How is the African insurance
industry responding to climate change?

7. How is the African insurance industry
responding to climate change?
UNEP Finance Initiative – Principles for
Sustainable Insurance
Diana Diaz, Programme Supervisor, PSI
June 2023

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Content
• Understanding climate change
in Africa
• Implications for the African
insurance industry (Climate-
related risks)
• Implications for the African
insurance industry (non-life)
• Implications for the African
insurance industry (life &
health)
• The role of the Insurance
Industry in addressing climate
change
• Insurers and climate change
mitigation
• Insurers and climate change
adaptation
• The Principles for Sustainable
Insurance
Climate change and the
insurance industry
Initiatives
• Climate change mitigation -
Net Zero Insurance Alliance
• Climate change adaptation -
V20 Sustainable Insurance
Facility
• The Nairobi Declaration
• Climate change adaptation -
African Climate Risk Facility
Conclusion & call to action
• 5 action points for the African
insurance industry

9. unepfi.org
Climate change and the
insurance industry
.

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•Heat waves will continue to increase
due to climate change
•Increases in drought frequency and
duration are projected over large parts of
southern Africa
•Increased exposure to pluvial and
riverine flooding
•Glaciers on the Rwenzoris and Mt
Kenya are projected to disappear by
2030, and by 2040 on Kilimanjaro
•Heat waves on land, in lakes and in the
ocean will increase considerably in
magnitude and duration
Understanding climate change in Africa – observed
impacts and projected risks

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Understanding climate change in Africa – observed
impacts and projected risks
Agricultural productivity
growth has been reduced
by 34% since 1961 due to
climate change.
Future warming will
negatively affect food
systems in Africa by
shortening growing
seasons and increasing
water stress
Rangeland net primary
productivity is projected
to decline 42% for west
Africa by 2050
Climate change poses a
significant threat to
African marine and
freshwater fisheries.
Fisheries provide the
main source of protein
for approximately 200
million people in Africa
and support the
livelihoods of 12.3
million people. At 1.5°C
global warming, marine
fish catch potential
decreases 3–41%.
Extreme hydrological
variability is projected
to progressively
amplify under all
future climate change
scenarios
Climate change has
reduced economic
growth across Africa
Inequalities between
African countries are
projected to widen with
increased warming
Africans are
disproportionately
employed in climate-
exposed sectors: 55–
62% of the sub-Saharan
workforce is employed
in agriculture and 95%
of cropland is rainfed
Exposure of people,
assets and
infrastructure to climate
hazards is increasing in
Africa compounded by
rapid urbanisation,
infrastructure deficit,
and growing population
in informal settlements
Over 2.6 million and 3.4
million new weather-
related displacements
occurred in sub-
Saharan Africa in 2018
and 2019

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Implications for the African insurance industry:
Climate-related risks

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• Economic actors may be affected through
systemic risks and macroeconomic effects
• Climate-related risks are recognised drivers
of financial risks
• Systemic risks such as pandemic
emergence, geopolitical instability, and
conflict would impact insurance
organisations.
• Insurance may become unaffordable or
uninsurable
Physical, transition and litigation risks can materialise
across general insurance liabilities

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Implications for the African insurance industry: Life & health
insurance

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Human health is impacted by and dependent upon climate,
meaning that climate-related physical risks can materialise across
life & health Insurance liabilities

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Insurer
Role
(financial risk
management)
Risk
Manager
Role
(physical risk
management)
Climate
change
action
Investor
Role
(responsible
asset
management)
The triple
role of the
insurance
industry
The triple role of the insurance industry in
addressing climate change
Over USD 6 trillion
world premium volume
Over USD 36 trillion
global assets under
management

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Insurance and climate change mitigation
Limiting global warming to 1.5°C
is expected to substantially
reduce damages to African
economies, agriculture, human
health, and ecosystems

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Insurance and climate change mitigation
Theory of change: it is “real economy” corporate action which drives
emissions reductions and insurance market participants need to find ways
to support and encourage real economy actions to achieve their own net-
zero insurance targets. These actions fall into three main areas of GHG
mitigation tactics, which can be supported and encouraged by insurance.

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Net-Zero Insurance Abatement
• As new business models are created to deliver decarbonised goods and services
from sectors, there will be new risks, which underwriters will need to
understand, develop loss data for, and price.
• Working with clients and governments to address systemic risks and the
lack of appropriate legislation or regulation to encourage new zero-carbon
activities.
• Support a responsible transition away from GHG-intensive activities. This is
also an area where insurance products (e.g. pensions, critical illness, other life
and health protection products) can play a part in the evolution of social protection
systems to support a just transition.
• Develop the role that insurers can play in the full life cycle aspects of
carbon in all sectors. For example, requiring low-carbon replacements for
damaged goods or property to help drive decarbonisation of underwriting
portfolios over time.
Neutralisation
Measures that companies take to
remove carbon from the atmosphere
in order to counterbalance the impact of
a source of emissions, within the value-
chain of the company, that remains
unabated
Compensation
Measures that companies take to prevent,
reduce or eliminate sources of GHG
emissions outside of their value-chain

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• Technological, institutional and financing
factors are major barriers to climate
adaptation feasibility in Africa
• Gender-sensitive and equity-based
adaptation approaches reduce
vulnerability for marginalised groups
• The diversity of African Indigenous
Knowledge and local knowledge systems
provide a rich foundation for adaptation
actions at local scales
• Early warning systems based on targeted
climate services can be effective for
disaster risk reduction.
• Risk-sensitive infrastructure delivery and
equitable provision of basic services can
reduce climate risks.
Insurance and climate change adaptation

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Insurance and climate change adaptation
Risk Assessment and Management:
Insurers assess and analyse climate-
related risks to help individuals,
businesses, and governments understand
their exposure to climate hazards.
Insurance underwriting: Insurers offer
specialized insurance products that cover
climate-related risks, such as property damage
due to extreme weather events, crop losses,
and infrastructure damage from climate impacts.
Data and Research: Insurers have
access to vast amounts of data and risk
modelling capabilities. They contribute to
scientific research and collaborate with
climate scientists to enhance
understanding of climate risks.
Risk Mitigation Incentives: Insurers
incentivize risk reduction and adaptation
measures through their underwriting
practices.
Partnerships and Advocacy: Insurers
collaborate with governments, international
organizations, and other stakeholders to
address climate change challenges.
Risk Transfer and Pooling: Insurers
facilitate risk transfer and pooling
mechanisms, such as catastrophe bonds
and insurance-linked securities, to
distribute climate-related risks across a
broader spectrum

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unepfi.org
Initiatives

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Launched at the 2012 UN Conference
on Sustainable Development, the
UNEP FI Principles for Sustainable
Insurance serves as a global
framework for the insurance industry
to address environmental, social and
governance risks and opportunities.
The vision of the PSI initiative is of a
risk-aware world, where the insurance
industry is trusted and plays its full
role in enabling a healthy, safe,
resilient and sustainable society.
The purpose of the PSI Initiative
is to better understand, prevent
and reduce environmental, social
and governance risks, and to
better manage opportunities to
provide quality and reliable risk
protection.
What is the
PSI?

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Membership
PSI is the largest collaboration between the insurance industry and the United Nations
PSI Signatory companies
Insurers, reinsurers, brokers, catastrophe
risk modelling firms, specialist service
providers.
PSI Supporting institutions
Insurance associations, Insurance
initiatives, Insurance regulators and
supervisors, academia, civil society
organisations.
150
PSI Signatory
Companies
104
PSI Signatory
Institutions

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Banks
Accompanying
text here if
required.
Insurers
Accompanying
text here if
required.
Investors
Accompanying
text here if
required.
The 4 Principles for Sustainable Insurance
Public
Governments
Regulators
and Other Key
Stakeholders
Clients and
Business
Partners
Core Business
Principle 1:
We will embed in our
decision-making
environmental, social and
governance issues
relevant to our insurance
business.
Principle 3:
We will work together with
governments, regulators
and other key
stakeholders to promote
widespread action across
environmental, social and
governance issues.
Principle 4:
We will demonstrate
accountability and
transparency in regularly
disclosing publicly our
progress in implementing
the Principles
Principle 2:
We will work together
with our clients and
business partners to
raise awareness of
environmental, social and
governance issues,
manage risk and develop
solutions.

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PSI Work
Programme
Net Zero Insurance Alliance
Piloting the TCFD recommendations
V20 Sustainable Insurance Facility
Natural ecosystems and pollution prevention
Insurance SDGs
Life & Health workstream
Regional implementation and Capacity Building
ESG risk management in insurance

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Net Zero Insurance Alliance
UN-convened Net
Zero Insurance
Alliance
Transition underwriting activities
to net-zero emissions by 2050
consistent with a maximum
temperature rise of 1.5°C above
pre-industrial levels by 2100
Key Developments
• Nov 22: Launch of Insurance-
Associated Emissions Standard
• Jan’23: Launch of NZIA Target-
Setting Protocol (TSP) in Davos
To become a member of the Net-
Zero Insurance Alliance, please
submit a complete NZIA application
to the Secretariat. The application
consists of the following documents:
• The NZIA statement of
commitment signed by your
CEO
• A completed NZIA application
form
• A CEO letter of support (see the
application form for more details)
• Your organisation’s Certificate of
Incorporation
How to join?

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Insurance-associated emissions standard
Commercial lines
Motor

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Emission-
reduction
targets
• An overarching
emissions reduction
target
• The sectoral
decarbonisation
approach (SDA)
Engagement
targets
• The portfolio
coverage approach
(PCA)
• The focused
engagement target.
Insuring the
transition targets
• re/insurance product or
service that covers
economic activities
considered to
contribute towards
climate change
mitigation or to a
combination of both
climate change
mitigation and climate
change adaptation.
Target-setting Protocol

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V20 Sustainable Insurance Facility
Purpose
The objective of the SIF is to
support the development and
availability of climate-smart
insurance solutions for micro-,
small- and medium-sized
enterprises (MSMEs) in 55
vulnerable economies.
Activities
1. Secure channel intent to
sell
2. Secure insurer intent to
insure
3. Secure gov’t ‘no objection’
4. Secure team to implement
5. Secure money to pay
team
6. Learn and repeat
How to get involved?
Reach out to the V20 SIF
Global Coordinator:
Brandon.matthews@un.org

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The Nairobi Declaration
Nairobi Declaration
The Nairobi Declaration on
Sustainable Insurance is an
African focused initiative
designed to encourage
transition to a more sustainable
African insurance market.
The Declaration was formally
launched at the UNEP PSI’s 4th
Africa summit hosted by ICEA
LION Group as a founding
signatory in Nairobi in April
2021

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African Climate Risk Facility
African Climate Risk
Facility
The Nairobi Declaration on
Sustainable Insurance (NDSI)
signatories announced during
COP27 a first-ever financial
commitment by the African
insurance industry to
underwrite $14 billion of cover
for Africa’s climate risks by
2030. Through the creation of
the African Climate Risk
Facility, they are committing to
protect 1.4 billion people
against floods, droughts, and
tropical cyclones.
Phillip Lopokoiyit, Group CEO, ICEA LION Group said: “As private
sector insurers, we have a key role to play in ensuring a sustainable future.
Our priority lies in providing solutions that will support the resilience of our
clients in light of the greatest challenge facing humanity. Coming together
as signatories to support the set-up of the Africa Climate Risk Facility, will
provide the necessary capacity needed by insurers to the solutions that will
respond to climate risk. The commitment that we have made, as
signatories, to underwrite $14 billion of cover for climate risks by 2030, will
protect 1.4 billion people against floods, droughts, and tropical
cyclones.This is indeed a testament of our quest to ensure that we
contribute to the long term sustainability and economic resilience of our
countries.“

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unepfi.org
Conclusion and call
to action

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5 action points for the African Insurance industry
1 1.5°C is the global goal, not 2°CCommit to science-based net-zero insurance and investment
strategies and targets. Cutting emissions in half by 2030 is the first priority.
2 Support adaption and resilience Commit to protecting individuals and communities from the impacts
of climate change. Reducing risk disaster, tackling loss and damage and building resilience must not be
the forgotten component of climate action.
3 Protecting the most vulnerable and “leaving no one behind” is indispensable closing the
protection gap and considering the needs of the most vulnerable is paramount.
4 Health is our greatest wealth Life & health insurers must consider climate change risks in
underwriting, not just in investment, particularly in a post-COVID world increasingly impacted by climate
change, nature loss and social inequality.
5 Systems change is required to overcome unsustainable development The entire insurance
industry value chain ─ along with insurance associations and regulators ─ must make sustainability an
integral part of decision-making. All insurance practitioners should have knowledge of sustainability.

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Requirements

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What are the benefits of becoming a
signatory/supporter?
1. Publicly demonstrating
your organization’s adoption
of sustainable insurance
aims and its accountability
and transparency to the
public in managing ESG
issues.
2. Access to UNEP and UN
system expertise and
resources on ESG issues,
policymaking and science.
3. Access to UN events to
dialogue with governments
and other stakeholders on
ESG issues, risk management
and insurance.
Events
4. Access to UNEP FI research,
networks, events and capacity
building services spanning ESG
issues, insurance, investment
and banking.
Training resources
Research
5. Access to Annual General
Meeting of signatories.

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Guidelines for disclosure
To adhere to Principle 4, your organisation may choose to answer the following recommended
guide questions to explain how Principles 1, 2 and 3 are being implemented:
Your organisation may also choose to align or cross-reference its disclosure with current reporting (e.g. annual
report, sustainability report, relevant disclosure or reporting frameworks).Your organisation is free to decide the content
of its disclosure. Regardless of the content, your organisation is required to:
Disclose annually, from the date your organisation became a signatory, its progress in implementing the Principles.
Your organisation is free to decide when its disclosure is completed each year.
Make its disclosures public and allow them to be publicly available on the UNEP FI website.
What key actions have you taken to date to achieve them (i.e. demonstrate progress)?
What are your aspirations and targets for this Principle?
How do you plan to achieve them?

38. Agenda
Climate change: How is the African insurance industry responding to climate change?
Panel discussion
Closure

39. Please meet our panelists for today
39
McKinsey & Company
Kelvin Massingham
Director of Risk and Resilience at FSDA Africa
Diana Chepng’eno
Africa Regional coordinator for the V20 Sustainable
Insurance Facility at UNEP FI
Lesley Ndlovu
Chief Executive Officer at African Risk Capacity Ltd
(ARC)

40. Agenda
Climate change: How is the African insurance industry responding to climate change?
Panel discussion
Closure

41. Q&A
Submit your questions via the "Chat" or "Q&A“
You can also raise your hand for live question

43. HOW ? AFAC has developed a comprehensive
theory of change to achieve its long-term vision
PRELIMINARY
Long-term
goal
Make the African Financial sector resilient to climate risks
Outcomes
The financial system actors have
access to comprehensive and
comparable data on climate
vulnerability
Outcome 2
The financial system actors are
adequately capacitated to be
able to address climate risks and
vulnerability in their decision-
making
Outcome 4
African financial systems are
aware of climate changes risks
to their economics
Outcome 1
Capita is mobilized towards
sustainable development
Outcome 5
An enabling policy environment
ensure climate-related risks
management is mainstreamed in
financial operations
Outcome 3
Countries central data
repositories in place
Countries‘ roadmaps to adopt
national green taxonomies for
investment purposes defined
Capacity to assess and
respond to climate and
nature-related risks built
Country roadmaps to mandatory
climate risk disclosure defined
Output Output 3 and 4
Public and private sector
financial actors trained on open-
source climate data
Output 8 and 9
Climate and nature-
related risk in financial decision
making trainings held
Output 1 and 2 Output 10
Convening for climate risk and
climate adaptation action policy
in place
Strategy to mobilize climate
financing in place within each
AFAC member
Output 5, 6 and 7
Financial institutions applying
recommendations of the TCFD
and TNFD with robust risk
assessment
Impact Increased climate resilience of financial sector Enhanced investments to drive low-carbon and climate-resilience development pathway
Detailed activities will be defined by working group (detailed next)

44. WHY? AFAC 2030 Vision
To transform the continent's financial sector
by 2030 …
… to ensure it is resilient to climate risks …
… while sustainably meeting the needs
of its growing population
AFAC 2030 vision is that « financial capital and
financial products and services are mobilized
to support Paris Agreement goal to make
financial flows consistent with a pathway
toward low greenhouse gas emissions and
climate-resilient development »
Vision Impact

45. WHY? AFAC expected outcomes
Leadership
and Awareness Access to data
Climate risk
regulation
Climate risk
management Green finance
The African financial
actors and
policymakers are aware
of climate change risks
to their economies
The African financial
institutions have
access to
comprehensive and
comparable climate-
related data
An enabling policy
environment ensure
climate-related risks
management is
mainstreamed in
financial operations
The African financial
stakeholders are
adequately capacitated
to address climate risks
and vulnerabilities
in their decision-making
Capital is adequately
allocated towards
sustainable
development
in Africa

46. An African-led platform
that convenes the voice
of Africa
A knowledge-sharing
structure that facilitate
partnerships and allow
regional institutions
to share ideas, experiences,
best practices, and expertise
A central structure which
allows to achieve synergies
between initiatives active
in the region
WHY ? AFAC unique value proposition

47. WHO ? A dedicated governance is being defined
and is articulated around the 4 sector groups
PRELIMINARY FOR DISCUSSION
Members: Rotating membership of member organizations and
implementation partners
Key responsibilities: (i) Undertake strategic planning and major
decisions, (ii) Responsible for operational decision-making
Frequency: meet twice a year
Members: Hosted by the AfDB
Key responsibilities: Coordinate the day-to-day operations
Frequency: Ongoing support
Members: Consist of Members and Implementing partners; Co-
chaired by 2 members of AFAC
Key responsibilities: Development and implementation of the
portions of the work plan to be defined during inception phase
(Q4 2022/Q1 2023)
Frequency: Bimonthly (or as agreed with
the co-chair)
Insurance
Capital
markets
Institutional
investors
Banking
Steering committee
Implementation partners
(e.g., UNEP-FI, GCA, FSDA, GFANZ)
Members
(Public authorities and Financial Institutions)
Secretariat

48. HOW? Operating model of working group
in practices
Membership: representatives from African financial institutions, as well
as policymakers / regulatory authorities. Chaired by a representative
from a leading African bank or financial institution. Implementation
partners are invited to attend/contribute
1
Contribution: expertise and perspectives of the members (e.g., sharing
of experiences and best practices, and to actively engage in discussions
on climate risk assessment, financing opportunities, knowledge sharing,
needs assessment, design of interventions (trainings etc.) and policy
advocacy)
2
Frequency of meetings: bi-monthly to discuss progress and plan
activities. Communication expected regularly outside of formal
meetings to share information, coordinate activities, and seek
input from members.
3
Activities: range of activities to address climate risks and opportunities
in African financial institutions as defined during their initial kick-off
4

49. Status and next steps
Public Launch of
the AFAC 2023-2025
strategy
September
Africa Climate Week
Formal validation
of the strategy
Q3 2023
AFAC steering committee
From September
Implementation kick-off
by sector working groups