Launch of the Good Practice Guide: Municipal Approach to Disaster Insurance in South Africa

In April 2026, the Good Practice Guide for Municipalities to Approach Disaster Insurance was launched jointly by the South Africa National Treasury and the World Bank Disaster Risk Financing and Insurance Program (DRFIP). The launch event brought 110 from the metro areas, secondary cities and various industry bodies, as well as the partners involved in the guide such as the National Treasury, World Bank, Department of Cooperative Governance and Traditional Affairs (CoGTA), Cenfri, South African Local Government Association (SALGA) and various industry bodies.

South Africa has one of the most developed insurance sectors in the world; yet municipalities rarely use insurance to respond to nature-based disasters. These have a severe impact on municipal assets. The actual costs of disasters to municipalities are not comprehensively known; however, over the past seven years, more than half of South Africa’s municipalities have received disaster-related grants. In 2022 alone, disaster funding exceeded South African Rand 3 billion (about US$160 million), largely in response to the KwaZulu-Natal floods (World Bank, 2025). 

The good practice guide highlights four key challenges: 

1. Municipal critical infrastructure is not insured 
The buildings and stadiums are insured but not the pipes, roads, or electrical systems. The main reason is that public infrastructure is not maintained and is therefore decaying. These conditions are unattractive for insurers; the risk is simply too high.

2. Municipal assets are insured for the wrong amount 
Since municipal budgets are tight, a common practice includes insuring assets at book value which is much lower than the replacement value. This reduces the premium, but also the potential payout if the asset is damaged. 

3. Slow and challenging claims
In the experience of municipalities, large claims take more than 12 months to resolve. This is problematic if the insurance payouts are expected to be used to rehabilitate the municipal asset or provision of essential services. 

4. Data gaps increase premiums
Poor asset data and outdated maintenance systems make risks harder to price, leading to higher premiums and denied claims.

The purpose of this good practice guide is to provide municipalities with a practical framework for designing and procuring appropriate insurance to manage disaster risk. It is intended to help municipalities determine when insurance should be purchased and what type of insurance is most suitable, within the context of a broader Disaster Risk Management (DRM) framework. Ultimately, the objective is to ensure that disaster insurance provides real value for municipalities and strengthens risk management practices—recognizing that insurance is much more than a policy.

The event began with an introduction of the partners by the World Bank, followed by a deep dive into the local context by the National Treasury before Cenfri Consulting presented the Good Practice Guide. The Mossel Bay Municipality then presented their approach, allowing the event audience to see a current case study. This was followed by a lively Q&A and the next steps. The event was well received by all participants, and everyone is looking forward to seeing how this practice guide will help South African municipalities increase their DRF resilience. 

This guide is supported by the Risk Finance Umbrella Multi-Donor Trust Fund (RFU) administered by the World Bank. RFU supports low- and middle-income countries to build their financial resilience against disasters, climate shocks, and other crises.