Energy has taken centre stage across Africa as the US-Iran conflict and consequent disruption to traffic through the Strait of Hormuz winds into its seventh month. The impact of geopolitics in general, and the wider Middle East conflict specifically, is beginning to filter into insurers’ financial reporting and outlook statements.
“Global geopolitical events, in particular the war in the Middle East, have derailed the prospects of an improved macro environment in South Africa,” wrote Santam Limited, the country’s largest non-life insurer, in its interim results for the half year to 30 June 2026.
Just days later, Statistics SA confirmed that the economy had suffered a quarterly contraction after six consecutive quarters of growth.
“The ongoing uncertainty and the on-and-off periods between negotiations and attempts to end the war have meant that oil has fluctuated from as low as US$80 per barrel, and is currently continuing upwards, to over US$100,” noted Frank Blackmore, Lead Economist at KPMG SA.
As Brent crude oil dances around US$100 per barrel, refined diesel and petrol prices, though regulated in many African markets, are pushing up to record highs.
It seems US President Donald Trump does not shoulder all the blame for the fuel price crisis. Blackmore pointed out that a lack of global refining capacity consequent to the ongoing Russia-Ukraine conflict was weighing heavily on the market. Case in point, local diesel is up about 100% versus crude oil, up 30%, over a similar timeframe.
Consumers experience these energy price shocks in their baskets of goods and services. Blackmore pointed out that higher energy prices were “obviously inflationary” and that the swings and roundabouts of global oil prices had transmitted to the domestic inflation number. South Africa’s consumer inflation rate rose to 5% in June, before pulling back to 4.3% in July.
“With fuel prices at current levels, we can expect inflation to rise again in August and September, given the fuel price increases we have seen in our economy,” Blackmore said.
Insurers will see this inflation on both the expense and revenue sides of their income statements. The cost of claims and operating expenses rise in line with inflation while income takes a dual hit from lower gross written premium on the back of struggling consumers and potentially weaker investment performances.
Santam’s H1 2026 results are telling. The insurer said that the “substantial rise in oil and related commodity prices” hurt global business confidence and growth prospects while elevating inflation risk. It noted that inflation suppressed disposable income, with a corresponding impact on the affordability of insurance. The insurer also indicated that geopolitical events had contributed to investment market volatility across asset classes.
If you need a more tangible example, Santam said the February 2026 start of the US-Iran conflict had caused a spike in Indian bond yields, producing unrealised losses on debt instruments held in Shriram General Insurance’s (SGI) insurance funds. Santam has a 14% effective economic interest in SGI, with changes in the value of that interest reflected in its investment return on capital.
Africa’s capital allocators, including insurers, have a role to play in shifting the continent’s energy footprint, and perhaps reducing the impact of future energy price shocks on businesses, households and entire country markets. One insurance-adjacent example is Sanlam Life’s participation in the SA-H2 Fund.
Sanlam Life recently joined the Public Investment Corporation, on behalf of the Government Employees Pension Fund, the Industrial Development Corporation and other development finance investors in the fund’s R3 billion (US$186 million) first close. The fund, which is managed by Climate Fund Managers in partnership with Invest International, will target green hydrogen and industrial decarbonisation projects across Southern Africa.
“Large-scale industrial decarbonisation and energy transition opportunities require significant amounts of long-term capital,” said Todd Micklethwaite, executive head for strategic initiatives and partnerships at Sanlam Alternative Investments.
“Mobilising that capital depends on creating investment structures that appropriately allocate risk and can bridge the gap between early-stage project development and institutional investment requirements.”
The SA-H2 Fund was held up as a strong example of how blended finance can bring public and private capital together to support the development of investable projects in emerging sectors such as green hydrogen, while helping build the industrial and infrastructure platforms needed for a more competitive, lower-carbon economy.
The potential in green hydrogen emerges from an unrelated Anglo-American estimate. The mining giant says that replacing a single conventional mine haul truck with a green hydrogen fuel-cell and battery alternative can displace around 3,000 litres of diesel a day.
Environmentally and socially orientated capital allocation can serve as a foil against the interconnected risks that insurers face in Africa, with higher impact possible due to the continent’s well-documented infrastructure challenges. But large infrastructure projects depend on risks being understood, priced and transferred sufficiently well for investors to commit funds.
Reinsurer Munich Re offered an interesting assessment of insurance and reinsurance in enabling the wheels of global commerce. Commenting on the uncertainties introduced through climate change, geopolitical tensions and rapid technological development, the reinsurer compared insurance and reinsurance to the human immune system. “
Just as the immune system protects the body from life-threatening illnesses, insurance protects people and businesses from losses that could threaten their very existence,” Munich Re wrote.
The reinsurer warned that climate-related events such as extreme temperatures, floods and other non-peak perils were “having a significant impact on infrastructure and, consequently, on supply chains.”
Africa’s citizens will be particularly concerned about spillovers of these perils into agricultural production and healthcare systems, alongside damage to buildings and technical installations as risk exposure shifts from ecological to economic.
Insurers and reinsurers will contribute to Africa’s long-term economic stability by making existing and emerging risks insurable.
“Volatility is not a temporary phenomenon,” explained Stefan Golling, member of the board of management, Munich Re. “Our mission is to pool our expertise, capacity and innovative strength to help our clients remain resilient, adapt successfully to change and navigate the new risk landscape with confidence.”
Capital is needed to address Africa’s infrastructure shortcomings, whether for basic healthcare and transport projects or energy transition megaprojects; insurance and reinsurance capacity enables that investment by protecting capital against defined risks.
In the energy space, the opportunity set spans countless projects that can reduce Africa’s reliance on vulnerable global supply chains and move economies closer to energy self-sufficiency.
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