In April 2022, heavy rains caused catastrophic flooding in KwaZulu-Natal, claiming over 400 lives and damaging infrastructure, businesses, and homes. The eThekwini Municipality infrastructure damage cost about R25-billion.
The disaster exposed vulnerabilities in municipal asset management and insurance coverage, with reports indicating that large portions of critical infrastructure were uninsured or under-insured. While some accounts suggest only one-third of key assets were adequately insured, this ratio has not been confirmed in public municipal records. The infrastructure crisis wasn’t about aging systems or maintenance backlogs – it was a failure to manage risk.
South African municipalities face a dilemma . As climate threats intensify, insurance companies are retreating from high-risk zones. This is creating a coverage crisis and forcing a revolution in how municipalities manage infrastructure. And within this crisis lies an opportunity.
According to the South African Insurance Association (SAIA), the risk landscape for non-life insurers is evolving, with industry data showing that weather-related claims — including storms, floods, and hail — have increased significantly in recent years.
While fire remains a major cause of loss in some commercial sectors, improved prevention measures have helped to mitigate certain fire risks. In response to these shifts, insurers and municipalities are exploring ways to collaborate more closely, using insurance mechanisms not only as post-disaster safety nets but also as levers to incentivise infrastructure resilience and risk-reduction initiatives.
The crisis behind the crisis
South African municipalities seem to face a simple infrastructure problem. But dig deeper, and a more complex challenge emerges: many cities don’t know what they own.
Pam Ramagaga, insurance risks GM at SAIA, says: “Many municipalities can’t tell you the exact number of transformers they have, let alone their condition.”
This knowledge gap isn’t just an administrative headache, it’s becoming an existential threat. When the 2022 KZN floods hit, many municipalities discovered that their infrastructure valuations were decades out of date. Some critical assets weren’t listed at all. Insurance claims failed not because of the disaster, but because cities couldn’t prove their losses.
The evidence is clear. A 2025 national study covering 1980-2023 shows a significant increase in hydrological and meteorological disasters. Yet, the conventional wisdom that municipalities need more funding misses the point.
Municipalities with accurate asset registers and regular maintenance face lower insurance premiums – even in high-risk zones. The problem isn’t just money; it’s how cities manage what they have.
Transforming through insurance
This reality is forcing a fundamental shift in municipal governance. Municipal assets need to be physically verified, geotagged, valued, and captured into a GIS-enabled register integrating engineering, financial, legal, and disaster-management data. Annual re-valuations will ensure insurance coverage reflects true replacement costs, with pre-loss documentation embedded into routine operations.
This modernised asset governance will support a multi-layered disaster-risk financing strategy, combining fit-for-purpose insurance, contingency reserves, and access to concessional credit — guided by hazard-exposure mapping to prioritise resilient infrastructure investment.
A promising innovation comes from Australia’s municipal insurance model. There, municipalities use mutual companies for insurance, enabling a unified risk management system across local governments.
This centralised approach allows officials to access a comprehensive dashboard view of the risks facing different municipalities.
“If we adopt the Australian model we can create our own captive for municipalities to contribute equitably,” says Ramagaga.
Centralising municipal risk management offers several advantages. Uniform risk management standards means municipalities can operate according to consistent guidelines, promoting fairness and efficiency. This approach allows the national government to exercise better oversight and control, ensuring cohesive risk management across the country.
To make insurance and risk mitigation more affordable and achieve significant cost savings, municipalities should pool risks. Centralisation improves coordination and facilitates a more effective response to large-scale events, enhancing the resilience of municipal operations.
Implementing a centralised municipal insurance programme would require overcoming several challenges and meeting specific requirements. Legislative changes would need to be enacted to enable such a system, involving cooperation and coordination among various government levels. Significant resources would be necessary for effective implementation and ongoing management.
The National Treasury would drive this initiative as the primary agency overseeing the development and operation of a centralised risk management system for municipalities.
The National Treasury has the power to do this – they’ve got the mandate from a fiscus protection perspective.
The path forward
It’s a vicious cycle. Without insurance, municipalities can’t rebuild after disasters and without proper infrastructure management, they can’t get insurance. Breaking this cycle requires more than technical solutions, it demands a fundamental reimagining of how cities manage their assets.
As climate risks escalate, the partnership between insurers and municipalities isn’t just about protection – it’s about transformation. The question isn’t whether South African cities will change, but whether they’ll change by design or by disaster.