West Africa’s insurance sector is grappling with unprecedented financial risks, with potential annual losses from climate-related disasters estimated at $30–50 billion, according to discussions at the 2025 West African Insurance Companies Association (WAICA) Education Conference held in Lagos. As climate change intensifies, insurers are being forced to rethink their strategies to address escalating threats while continuing to serve policyholders and bolster regional resilience.
Growing Climate Threats
West Africa, despite contributing less than 4% to global greenhouse gas emissions, is highly vulnerable to climate impacts. Floods, droughts, rising sea levels, and desert encroachment are becoming routine, severely affecting urban centers like Lagos and rural areas alike. A 2019 World Economic Forum report highlighted Lagos as one of 11 low-lying cities at risk of disappearing by 2100 due to rising sea levels. Similarly, a 2012 University of Plymouth study warned that sea level rises of three to nine feet could devastate coastal regions, impacting cities across West Africa and beyond.
Extreme weather events are already causing widespread damage. In 2022, Nigeria faced its worst flooding in a decade, affecting 33 of 36 states, displacing 1.4 million people, and causing over 600 deaths. In 2015, Accra, Ghana, suffered deadly floods and a petrol station explosion, claiming over 150 lives. Sierra Leone’s 2017 mudslide in Freetown killed over 1,100, while recurring droughts in Niger and Chad have decimated agriculture, threatening food security and livelihoods.
Financial and Economic Impacts
Zillah Malia, Senior Manager for Climate Finance at FSD Africa, emphasized the region’s vulnerability at the WAICA conference, noting that 17 of the 20 countries most threatened by climate change are in Africa. With insurance penetration below 3%, the sector faces a massive protection gap. Globally, only 35% of $357 billion in economic losses from natural disasters in 2023 were insured, leaving a $234 billion shortfall. This gap has led to “insurance deserts,” where coverage is either unavailable or prohibitively expensive.
Malia highlighted the insurance sector’s potential as a “triple enabler” in risk management, underwriting, and investment. With trillions in managed assets, insurers can drive green growth by investing in renewable energy, sustainable infrastructure, and climate adaptation projects. She urged the industry to leverage low penetration rates as an opportunity to develop innovative climate risk products and support infrastructure development.
Calls for Systemic Change
Bockarie Kalokoh, former Deputy Minister of Finance for Sierra Leone, stressed the interconnected nature of climate risks, from droughts in the Sahel to floods in coastal cities. These events disrupt agriculture, water availability, energy production, and financial stability, requiring insurers to adopt a systemic risk perspective. Kalokoh advocated for innovative solutions like parametric insurance and climate scenario analysis to close the protection gap and incentivize risk reduction.
A notable example is Lagos State’s recent collaboration with the Insurance Development Forum, the United Nations Development Programme, and Germany’s BMZ through the InsuResilience Solutions Fund. This partnership developed a $7.5 million parametric flood insurance product to provide rapid financial relief to up to four million residents during severe flooding, enhancing climate resilience.
Industry Challenges and Innovations
Wole Oshin, Group Managing Director of Custodian Investment Plc, underscored how climate volatility is reshaping insurance practices. Frequent extreme weather events are straining underwriting models, increasing claims, and challenging solvency margins. Oshin cited examples like Nigeria’s 2022 floods, Ghana’s 2015 disaster, and Sierra Leone’s 2017 mudslide, which have directly impacted insurers’ balance sheets and reinsurance structures.
To address these challenges, the African Climate Risk Facility, a collaborative effort involving 85 insurers, aims to provide $14 billion in climate coverage by 2030, protecting 1.4 billion Africans against floods, droughts, and cyclones. This initiative reflects the industry’s commitment to tackling Africa’s risk gap through innovative solutions.
Looking Forward
The insurance sector is transitioning from a peripheral player to a central pillar of West Africa’s economic resilience. By embracing sustainable practices, mobilizing capital, and developing new products, insurers can mitigate the financial impact of climate risks while supporting national development. However, overcoming data gaps, regulatory hurdles, and low penetration rates will require coordinated efforts among insurers, governments, and international partners to ensure long-term stability and growth.
