SA Prudential Authority Climate Guidance: What Insurers Actually Need to Do

The South African Prudential Authority released two climate guidance notes in 2023 that most of the SA insurance market has still not fully operationalised. They are not legally binding, which is why they sit on desks rather than in live governance frameworks. They are, however, signalling the direction of travel for SAM supervision — and the sequencing matters, because they will eventually harden into binding expectations.

The two notes are complementary. One addresses governance and risk management — how climate risks should be incorporated into ORSA and enterprise risk management. The second addresses disclosure — how climate risks and opportunities should be reported externally. Together they echo the TCFD pillars and align deliberately with ISSB/IFRS S2, which has since become the global reference standard.

1. Where the Guidance Sits in the SA Regulatory Stack

The PA’s guidance does not stand alone. It connects to existing Governance and Operational Standards for Insurers, specifically GOI 3 (Risk Management and Internal Controls) and GOI 3.1 (Own Risk and Solvency Assessment). The first guidance note explicitly frames climate as something that should be treated within those existing standards, not in a parallel workstream.

For a SAM-regulated insurer, this matters because ORSA is already a statutory requirement. The PA is not asking for a new document — it is asking that the existing ORSA be extended to capture climate-related risks in a way consistent with GOI 3.1. Insurers who treat climate as an add-on annex to the ORSA miss the point. The requirement is integration.

flowchart TB
    A[PA Climate Guidance] --> B[GOI 3<br/>Risk Mgmt & Internal Controls]
    A --> C[GOI 3.1<br/>ORSA]
    A --> D[IFRS S2<br/>Disclosure]
    A --> E[TCFD<br/>Framework]

    B --> F[Integrated<br/>Climate Risk<br/>Framework]
    C --> F
    D --> F
    E --> F

    style A fill:#0A0F1E,stroke:#C9A84C,color:#F0F0F0
    style F fill:#0A0F1E,stroke:#00C2CB,color:#F0F0F0
    style B fill:#0A0F1E,stroke:#00C2CB,color:#F0F0F0
    style C fill:#0A0F1E,stroke:#00C2CB,color:#F0F0F0
    style D fill:#0A0F1E,stroke:#00C2CB,color:#F0F0F0
    style E fill:#0A0F1E,stroke:#00C2CB,color:#F0F0F0

2. Alignment and Gaps Across Frameworks

Most SA insurers I work with are trying to read the PA guidance alongside three other reference points: GOI 3.1, TCFD, and IFRS S2. They overlap substantially, but not perfectly.

Requirement	PA Guidance	GOI 3.1	TCFD	IFRS S2
Board-level climate oversight	Yes (governance note)	Implicit via ORSA governance	Yes (Governance pillar)	Yes (mandatory)
Climate in risk register	Yes	Yes (any material risk)	Yes	Yes
Scenario analysis	Recommended	Recommended	Recommended	Mandatory resilience analysis
Scope 1, 2 emissions	Encouraged	Not specified	Recommended	Mandatory where material
Scope 3 / financed emissions	Encouraged	Not specified	Recommended	Mandatory where material
Industry-specific metrics	Not specified	Not specified	Sector guidance	Mandatory for insurers

The useful observation is that IFRS S2 is the most prescriptive. An insurer who builds for S2 satisfies the PA guidance and TCFD automatically. The reverse is not true — an insurer compliant with the PA guidance as a minimum may still have gaps against S2, particularly on industry-specific metrics and quantified resilience analysis.

3. A 90-Day Getting-Started Plan

For small and mid-size SA insurers without an existing climate workstream, the first 90 days should focus on diagnostic and foundation, not reporting. The reporting comes after the data and governance exist.

Days 1-30 — Governance and scoping. Name the board committee with climate oversight and add it to the committee charter. Add a standing climate risk agenda item to the quarterly risk committee. Map existing ORSA governance onto the four TCFD/S2 pillars and identify gaps. This is desk work, no vendor required.

Days 31-60 — Risk register and materiality. Add climate as a transverse risk category across the existing risk register, tagged to underwriting, investment, reserving, operational and reputational risks. Run a qualitative materiality assessment for the insurer’s book — which lines of business are most exposed to physical risk (coastal property, crop, motor), which to transition risk (investments in carbon-intensive sectors), and which to legal and reputational risk. Output is a one-page heat map, not a 50-page consultant deliverable.

Days 61-90 — Scenario analysis and emissions baseline. Commission or perform a first-pass physical-risk scenario analysis against the top one or two material lines of business. Produce a Scope 1 and 2 emissions baseline for the insurer’s own operations (typically the smallest, most tractable inventory). Document the methodology, data sources and assumptions. Present to the board risk committee for review. The goal is not perfection; it is establishing a repeatable baseline that can be refined in subsequent cycles.

At the end of 90 days, the insurer has a defensible position in any PA supervisory conversation: governance is in place, climate is in the risk register, one scenario has been run, and the emissions baseline exists. The subsequent year of work refines the methodology, expands scenario coverage, builds financed emissions, and integrates the outputs into ORSA and external reporting.

4. Why Sequence Beats Ambition

Several SA insurers have jumped directly to IFRS S2 project plans with external consultants, six-figure budgets and twelve-month timelines. This is not wrong, but it front-loads technical complexity before the governance is in place. When the S2 disclosures are ready but no board committee has ever discussed climate scenarios substantively, the disclosure has no internal audience and no connection to decision-making.

The PA guidance is useful precisely because it sequences governance and risk management first, and disclosure second. For an insurer at the start of the journey, the guidance note on governance and risk is the right 2024 focus. The disclosure note, and S2 alignment, is the right 2025 focus. That sequencing lets the first set of disclosures report on a framework that actually exists, rather than a framework built to support the disclosure.

Climate is not the most complex risk on a SAM insurer’s register. What makes it hard is that it is slow, uncertain and multi-generational, which is the opposite of how most actuarial infrastructure is designed to operate. The PA guidance is a reasonable attempt to translate that awkward fit into operational expectations. Insurers who take it seriously now will spend less adjusting later, when the expectations become binding.