Scaling insurance for climate resilience in Africa

This report by Krutham, commissioned by the African Climate Foundation, evaluates the role of climate risk insurance in Kenya. It analyzes the country's disaster risk financing strategies, the current state of the insurance and reinsurance markets, and the barriers preventing the insurance sector from contributing more effectively to climate adaptation and resilience.

• Kenya faces severe climate vulnerabilities, with over 70% of natural disasters being climate-related. In 2024, severe flooding affected 40 of 47 counties, causing more than 230 deaths and displacing 40,000 households. A major drought from 2008-2011 in the Horn of Africa slowed the economy by an average of 2.8% and caused $12.1 billion in damages and losses.
• The Kenyan insurance industry is struggling with profitability and physical risks. In 2023, the industry's combined ratio was 287%, meaning claims and operating expenses far exceeded premium income. There was also a 13.3% increase in insurance claims in 2023, and the loss ratio for long-term insurance business rose by 22.2%.
• Kenya has a significant funding gap for climate adaptation, requiring approximately KES 853 billion ($6.6 billion) annually, with 71% of this needed for climate resilience. However, most climate finance is directed toward mitigation; in 2018, mitigation represented 79% of total funding, while only 11.7% went to adaptation.
• The Kenya Livestock Insurance Programme (KLIP), introduced in 2015, uses satellite-based Normalized Difference Vegetation Index (NDVI) data to provide index-based insurance to pastoralists. Between 2015 and 2019, 96% of beneficiaries received at least one payout, with an average cumulative payout of KES 11,600 per beneficiary.
• The Kenya Agriculture Insurance Programme (KAIP) is a subsidized crop insurance scheme operating as a Public-Private Partnership (PPP). It covers risks including drought, excessive rainfall, flooding, pests, and diseases for crops such as maize, sorghum, green grams, and beans. By 2020, approximately 750,000 farmers were insured under KAIP.
• Insurance penetration in Kenya remains low at 2.4% as of 2023. Growth is hindered by inadequate weather data infrastructure in rural areas, inconsistent internet connectivity, and 'basis risk' in index-based products, where payouts do not align with actual losses. The chance of farmers suffering losses without compensation is estimated between 16% and 36%.
• The general insurance market reached KES 88 billion ($686 million) in gross written premiums in 2023. There is a growing reliance on reinsurance for high-risk industrial exposures; for fire industrial insurance, the risk retention ratio dropped from 26% in 2018 to 19.8% in 2022.
• Kenya's regulatory environment is supportive of innovation, featuring tiered licensing for microinsurers and the BimaLab sandbox for testing new products. However, high starting capital requirements for microinsurers and a lack of standardized climate-related project appraisal methodologies in PPPs remain significant barriers.
• The report recommends establishing a 'basis risk fund' capitalized by insurers, government, and donors to compensate farmers for verified losses that do not trigger index payouts. It also suggests creating a county-focused catastrophe risk pool to provide rapid liquidity to local governments via parametric triggers.

APA

African Climate Foundation (2024). Scaling insurance for climate resilience in Africa. https://africanclimatefoundation.org/wp-content/uploads/2026/06/KenyaFinalVersion2Dec.pdf

Chicago

African Climate Foundation. Scaling insurance for climate resilience in Africa. 2024. https://africanclimatefoundation.org/wp-content/uploads/2026/06/KenyaFinalVersion2Dec.pdf.

Wikipedia

{{cite report |author=African Climate Foundation |title=Scaling insurance for climate resilience in Africa |date=2024 |url=https://africanclimatefoundation.org/wp-content/uploads/2026/06/KenyaFinalVersion2Dec.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{africanclimatefoundation2024scaling, author = {{African Climate Foundation}}, title = {{Scaling insurance for climate resilience in Africa}}, institution = {African Climate Foundation}, year = {2024}, url = {https://africanclimatefoundation.org/wp-content/uploads/2026/06/KenyaFinalVersion2Dec.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }