Africa’s insurance industry has spent years investing in systems, data, actuarial expertise and reporting capabilities to meet increasingly demanding regulatory requirements when it comes to quantifying risks. The implementation of International Financial Reporting Standard (IFRS) 17 provided one of the clearest examples of the scale and cost involved.
Now, before many insurers have fully settled the operational and financial demands of the new insurance accounting standard that replaced IFRS 4, another measurement challenge is emerging.
The adoption of IFRS S1 and IFRS S2 is set to require insurers to identify, assess and disclose how sustainability and climate-related risks could affect their businesses, creating another demand for data, modelling, systems and specialist skills.
For an industry whose business depends on understanding uncertainty and putting a price on risk, the cost of producing sufficiently reliable information to measure that uncertainty is becoming an increasingly important part of doing business.
But as the recently published 2026 sustainability reporting readiness assessment by the Institute of Certified Public Accountants of Kenya (ICPAK) found, the struggle by many Kenyan companies to put a financial and operational number on climate risk offers a sneak peak into the new test facing insurers and reinsurers across Africa.
The data challenge
The ICPAK study found that the strategic intent from boards of companies towards sustainability reporting is advancing faster than the firms’ ability to produce the detailed disclosures required under S1 and S2 standards.
“Readiness must increasingly mean more than having a policy or producing a narrative. It means having systems, people, controls, data and evidence capable of withstanding independent scrutiny,” said Prof Elizabeth Kalunda, chairman at ICPAK, in a finding that reminds insurers of another IFRS 17 moment.
The insurance contracts accounting standard (IFRS 17) replaced IFRS 4 for annual reporting periods beginning on or after January 1, 2023. Its implementation required insurers to overhaul how they collect, process, model and report information on insurance contracts. It brought together actuarial, finance, technology, data and risk functions in ways that many insurers had not previously experienced.
Companies had to work with more granular information on insurance contracts, cash flows, assumptions and profitability while integrating systems that had historically operated in separate parts of the business.
The transition proved particularly demanding for many insurers in Africa because IFRS 17 required insurers to build the infrastructure needed to generate the information on a continuing basis. PwC Kenya described data and systems as the backbone of IFRS 17 implementation, with insurers required to extract, validate and manipulate information to meet the new reporting requirements.
For many companies, the work also meant significant investment in technology, external expertise, actuarial capacity, controls and staff training. This cost of the transition has not disappeared simply because IFRS 17 became effective.
Insurers have had to maintain and refine systems, address data-quality problems, adapt processes and build internal capabilities around a reporting framework that is substantially more data-intensive than its predecessor.
Now the next major reporting transition, IFRS S1 and S2, will demand many of the same capabilities. IFRS S1, which covers sustainability-related financial information, and IFRS S2, which focuses specifically on climate-related disclosures, require companies to assess information that can affect their prospects. For insurers, this moves climate risk further into areas that are already central to the business.
Continental Reinsurance, which operates in more than 50 African countries, discloses on its website that it has had to engage PricewaterhouseCoopers (PwC) to help lay the groundwork for S1 and S2 disclosures.
“Technical sessions facilitated by PwC have supported pilot implementation of IFRS S1 and S2, including a pilot implementation toolkit covering disclosure templates, materiality frameworks, and data collection guidance,” says the reinsurer.
This signals that, much like the transition from IFRS 4 to IFRS 17, compliance with S1 and S2 will not be a switch that insurers can simply flip overnight.
Building reporting capacity
ICPAK chairperson Prof Elizabeth Kalunda identified the following as what should be the priorities for firms, including insurers, as they move from readiness assessment to a functioning sustainability reporting ecosystem:
- First, build a common national implementation architecture. Kenya needs consistency in how the standards are understood, applied, supervised and assured. This requires continued coordination among the regulators, preparers, investors, professional bodies and development partners. Our objective should not be to create multiple, disconnected reporting regimes, but to ensure sector-specific requirements and guidance align with the global baseline while responding to institutional and economic realities.
- Second, translate global standards into practical, sector-specific tools. A bank, insurer, pension scheme, agricultural enterprise and listed manufacturing company do not face identical sustainability-related risks. We should therefore continue developing and refining sector guidance, reporting templates, worked examples, data dictionaries, implementation checklists, and practical case studies. The banking template demonstrates what is possible when industry, regulators, professional bodies and development partners work together.
- Third, invest in data systems—not merely reporting skills. The readiness assessment shows that metrics and targets remain a major weakness. Sustainability reporting requires reliable activity data, emission factors, assumptions, methodologies, documentation and, increasingly, value-chain information. We must therefore promote investment in proportionate and scalable data systems, especially for entities with limited technical and financial resources.
- 4. Fourth, strengthen human capacity. No reporting framework can succeed without competent people. We need accountants who understand sustainability-related financial disclosures; sustainability professionals who understand financial reporting; boards that understand their oversight responsibilities; risk teams that can assess climate-related risks; and assurance practitioners who can evaluate the reliability of reported information.
- 5. Fifth, build trust through assurance and accountability. The future of sustainability reporting will depend on whether users can trust the information being disclosed. This requires robust internal controls, clear governance responsibilities, documented processes, reliable evidence trails and independent assurance. This transition will require reliable data, stronger internal controls, proper documentation and professionals with appropriate sustainability competence. Assurance is therefore not simply a compliance cost. It is part of the market’s credibility infrastructure.
Beyond compliance
Climate change can affect the frequency and severity of losses from floods, droughts, storms, heat and changing rainfall patterns. It can alter agricultural yields, property risks, infrastructure exposures and supply-chain vulnerabilities. These effects ultimately feed into the key questions insurers already ask:
- What is the probability of loss?
- How severe could the loss be?
- What should the premium be?
- How much should be retained?
- How much should be transferred to reinsurers?
Now, answering those questions will increasingly require data that many insurers in Africa may not traditionally have collected at the required level of detail. This makes climate reporting another layer to the industry’s existing cost of measuring risk.
As the ICPAK assessment noted, insurers carry climate exposure on both sides of the balance sheet: underwriting (claims exposure to weather-related events) and investment (asset portfolio).
It adds that “Existing actuarial capability, already used for reserving and pricing, is a natural resource for climate scenario analysis. Insurers should redeploy existing actuarial teams for this work rather than building a separate climate-risk function from the ground up.”
Risper Ohaga, chief executive of APA Apollo Group, has argued that sustainability should not be treated as another compliance exercise but as part of how companies evaluate risk, allocate capital and build resilience.
In insurance, she points to changing weather patterns, extreme drought and flooding as risks already affecting agriculture, property, infrastructure and supply chains. That is where climate reporting could ultimately become more significant than the disclosures themselves.
“Corporate leaders should not view this transition simply as another compliance hurdle or regulatory checklist. It represents a fundamental opportunity to rethink how we run our organisations, how we evaluate risk, allocate capital, build enterprise resilience, and generate long-term value,” said Ohaga in a commentary that followed the ICPAK report.
The cost for smaller insurers
Kenya’s experience provides an indication of the challenge. The ICPAK readiness assessment found that insurance companies were still at an “emerging” level of preparedness, despite scoring above the overall average.
Many insurers in Africa are running on razor-thin capitals that may not accommodate mega investments into systems. IFRS 17, S1 and S2 conversations are coming as insurers across African markets navigate another regulatory demand aimed at improving their ability to understand and absorb risk.
Risk-based capital frameworks, for example, require insurers to develop a clearer understanding of the risks on their balance sheets and the capital required to absorb them. More sophisticated risk-based pricing similarly requires companies to distinguish between different risk characteristics and translate that information into premiums.
IFRS 17 requires more granular measurement and reporting of insurance contracts. S1 and S2 now extend the measurement challenge into physical and transition risks associated with changes in the environment and the economy.
These requirements serve different purposes. However, from the perspective of an insurer’s finance, actuarial, risk and technology functions, they share a common requirement — reliable data. The demand for reliable data calls for new data sources, software, modelling capabilities, external consultants, staff training, assurance processes and stronger governance.
The gaps in historical data, limited modelling capacity and uneven digital infrastructure can make sophisticated risk measurement difficult. While large re/insurance groups may have actuarial, technology, risk and sustainability teams capable of sharing the cost of new requirements across a larger business, smaller firms may have to rely more on external expertise as they try to build internal capabilities.
An insurer pricing flood risk cannot rely solely on past claims if rainfall patterns and the frequency or severity of flooding are changing. Similarly, agricultural insurers may need to incorporate changing weather patterns into models that were previously based largely on historical observations.
When past data no longer works
Climate risk can make the problem more pronounced because historical experience may become a less reliable guide to future losses. Kenya Reinsurance Corporation, with this in mind, is looking for a consultant to map out its exposure to floods and earthquakes across East Africa as extreme weather risks become an increasing concern.
The exercise will estimate potential catastrophe losses over different return periods and determine its probable maximum loss (PML) and tail value at risk (TVAR) for individual events and on an aggregate basis.
“The scope of catastrophe modelling is to estimate Kenya Re’s probable maximum exposure to catastrophic events for each return period and provide a report on the same,” said the reinsurer in the tender document searching for a consultant.
As insurers prepare for the new reporting regime, they may also have to weigh the cost of being unable to produce credible sustainability information. Financial Sector Deepening Kenya and ICPAK recently highlighted the wider financial implications of weak preparedness, noting that investors are increasingly demanding transparency on sustainability-related risks, governance and long-term resilience, even as many companies lack the technical capacity, data systems and practical guidance needed to respond effectively.
“This mismatch creates friction by raising the cost of capital, limiting access to sustainable finance, and undermining investor confidence,” Sarah Makena (FSD- Green finance lead) and Elvis Moenga (ICPAK manager for standards and sustainability) in a mid 2026 article.