The growing intensity of climate shocks in Zimbabwe is reshaping how insurers think about risk, pushing environmental risk considerations to the forefront of ESG.
From the devastation of the 2019 tropical cyclone to recurring droughts and floods, extreme weather events have exposed gaps in insurance and forced the industry to rethink how to manage risk and deliver protection in a changing climate.
On 15 March 2019, Tropical Cyclone Idai made landfall in Zimbabwe, hitting the country with sustained rainfall and floods. Chimanimani and Chipinge districts in the eastern parts of Zimbabwe were the hardest hit, with other provinces feeling the impact. Zimbabwe had experienced floods before, but Cyclone Idai was one of the costliest and deadliest to hit the country.
Its aftermath left households and individuals distressed and counting losses— from farmers whose fields were swept away to business people who lost stock and ordinary people who lost properties and household essentials.
For famers like Kundai Mautsi, whose plots and livestock were not insured, the disaster meant to start all over again, and seven years later, he has not fully recovered.
“The cyclone was deadly, and I was left with nothing. My life was spared, but there are other things I learned and am now aware of. As much as I had my life insurance in the form of a funeral policy, I wish I had known better the importance of insuring my business too,” said Mautsi.
Farmers’ circumstances were further compounded by the 2020-2021 rainfall season, which was characterised by much rain as a result of a tropical storm and one cyclone. In 2020, Tropical Storm Chalane swept across Manicaland, revisiting the same Cyclone Idai survivors.
The weather trends have been more or less the same pattern in the past years. According to the World Meteorological Organisation (WMO), 2024 was the hottest year on record. Zimbabwe experienced a severe drought caused by the El Niño phenomenon.
During the 2021/22 agricultural season, Start Network Zimbabwe partnered with African Risk Capacity (ARC) and the Government of Zimbabwe and introduced an insurance policy that protected more than 800,000 people from drought risk. Start Network Zimbabwe focus on proactive, anticipatory action against drought, utilising climate insurance and early warning systems to protect vulnerable communities.
Such interventions and the coming of insurance packages tailored for smallholder farmers, Mautsi said, are changing farming in the face of environmental threats such as climate change.
In November and December 2024, the Ministry of Lands, Agriculture, Fisheries and Rural Development, the Insurance Council of Zimbabwe (ICZ) and the Insurance and Pensions Commission (IPEC) carried out a collaborative national agriculture insurance education programme and launched index farming insurance products. Since then, the ICZ team has continued with the exercise, interacting with farmers at the ward level.
ICZ engagement includes Manicaland, a province prone to floods and cyclones due to its proximity to Mozambique and geo-positioning in the path of tropical cyclones. Other targeted wards are in the Midlands, Mashonaland East, West and Central, Masvingo, Matabeleland North and South provinces.
“ICZ aims to ensure that smallholder farmers across Zimbabwe are covered under its Agro Pool. This will contribute to the national financial inclusion strategy as well as to the development of a resilient agriculture sector,” said the council.
ICZ is in a partnership with FSD Africa in a transformative enterprise to incorporate Environmental, Social, and Governance (ESG) principles into the operations of the insurance sector. According to the council, this collaboration underscores its commitment to building a future-ready and sustainable insurance industry. ICZ aims to enhance the sector’s resilience, sustainability, and impact by aligning with global ESG standards.
A feasibility study on the demand for agricultural index insurance in Zimbabwe found that both insurers and participants across the agricultural value chain, including smallholder farmers, are interested in adopting index insurance. The study, conducted by the World Bank Group’s private sector arm, International Financial Corporation (IFC) as part of its partnership agreement with IPEC, also revealed that both the supply side and the demand side would like the Government to subsidise the premiums for smallholder farmers.
“Some of the key risks that smallholder farmers face includes weather-related risks, biological risks, market risks, policy and political risks, and labour and health risks,” notes the report.
On the environmental pillar of ESG, ICZ made a public commitment that it seeks to promote climate risk awareness and strengthen insurance products like weather-index insurance that protect MSMEs and smallholder farmers against climate shocks such as drought and floods.
ICZ has lined up programmes and partnerships to deepen financial inclusion by embedding ESG-aligned insurance within informal and underserved communities, through access to affordable risk protection and training.
The council reaffirmed its commitment to advancing sustainable development by signing the Nairobi Declaration on Sustainable Insurance (NDSI), which is a pioneering commitment by African insurance industry leaders to integrate ESG principles into core business operations.
Insurance companies face three forms of climate change risks— physical risk, transition risk and liability risk. In Zimbabwe, insurers are adopting tools and ways to predict weather-related disasters, which can expose them to claims whenever there is a flood, storm or drought.
An insurtech expert, Faustina Choga, said there is a need to deploy artificial intelligence and agritech models that are efficient to update both the insured and the insurers while keeping up with the pace of changing weather patterns.
“This will empower farmers to make informed decisions on planting and harvesting, while also enabling insurers to respond faster and more accurately to climate-related risks,” said Choga.
Meanwhile, the government of Zimbabwe is supporting all farmers under its conservation agriculture programme – Pfumvudza/Intwasa. At least 1.6 million smallholder farming households are supported with inputs.
In its policy advisory paper on agricultural index insurance, IPEC implored the government to subsidise premiums for smallholder farmers to ensure more farmers are covered. Countries such as Kenya and Uganda have successfully championed agricultural index insurance targeting smallholder farmers.
“I really believe that every Pfumvudza/Intwasa farmer should be covered by some insurance, they should buy some, and we subsidise some,” said Prof Mthuli Ncube.
Globally, the insurance industry is in a unique position in relation to the changing environment. In countries where insurers and businesses are subject to increased regulatory requirements to demonstrate a sophisticated understanding and management of climate risks, liability exposure is increasing.
Such uncertainties and challenges have led insurers such as Old Mutual Zimbabwe to develop and consolidate sustainable business practices. According to the company’s recent sustainability report, it is committed to sustainable practices and aims to mitigate climate change risks and capitalise on opportunities from the energy transition.
Financial products like drought insurance and climate finance have been developed on the back of sectors such as agriculture, mining, and tourism being impacted by extreme weather events, including floods and droughts.
Choga said there is perhaps less awareness of the risk of indirect claims that arise as a result of weather-related incidents.
“The regulator, ICZ and their partners are doing well in educating and training both the insurers and the vulnerable groups. It’s a shift in the industry and the global business sector. Businesses need to know about the concentration of risk, taking into account the indirect claims and different climate-related events,” said Choga.
ESG experts note that in many jurisdictions, regulators expect insurers to actively manage their climate-related risk exposure. They are also required to be transparent about where these exposures arise and to demonstrate how they are addressing the risks associated with the shift to a low-carbon economy.
International consultant on sustainability projects and CEO of Toxiconsol consultancy, Tawanda Muzamwese, said in countries like Zimbabwe, where shocks are severe but resources are limited, resilience, justice, and compliance are crucial.
“Their implementation is based on context. Real change in ESG is when it attains measurable results and impacts people’s lives. ESG reduces risk to insurers and reinsurers. The benefits outweigh any potential costs. Changes would be better resource efficiency, reduced risk, and increased profitability,” said Muzamwese.
COMMENTS