Article | Creating Resilience

Business Insights | Climate Risk & Real Estate: Why mitigation is the best insurance policy

April 15, 2026

By Corrado Forcellati Su-Fern Tan Jonathan Hills

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CBRE’s sustainability professionals in Asia Pacific are constantly ruminating about the myriad ways in which severe climate events are impacting real estate across the region. These include pushing up insurance costs and reducing insurability; a phenomenon that we believe warrants further investigation.

Our conviction is that as rising climate risks cause insurance premiums to rise and coverage to shrink, devaluing high-risk properties, accurate, insightful and forward-looking valuations will be critical to driving investment in resilience and mitigating escalating insurance costs.

How are climate events impacting insurance costs, loans and property values?

Climate-related events are contributing to losses in real estate values and driving a surge in some insurance and asset financing costs across Asia Pacific, creating a so-called "insurability crisis" in high-risk zones.

Munch Re data show that just 12.3% of the region’s US$ 73 billion in total losses from natural disasters in 2025 were insured.1 Some insurers of residential assets have exited high-risk areas altogether while those that remain have hiked premiums and adjusted contract terms, reducing affordability.2

In Australia, where despite a surplus of capacity and new entrants into the market having begun to rein in previously robust growth in premiums, the increased frequency of floods, cyclones, and bushfires continues to push up costs in high-risk areas.

Published in September 2025, Australia’s National Climate Risk Assessment identified households and critical assets/infrastructure (which includes some commercial real estate) as one of the most exposed sectors to climate change and warned that insurance affordability would worsen.3 Senior insurance industry executives in Australia are increasingly warning about the impacts of climate change and the cost of natural perils and the bearing they have on how insurance is priced.4

Other drivers of higher premiums include rising reinsurance. This is essentially "insurance for insurance companies", whereby insurers transfer portions of their risk portfolios to another party (the reinsurer) to reduce liability. As reinsurers hike rates to compensate for rising climate-related costs such as weather-related claims and property repairs and maintenance, insurers are transferring these costs onto clients.

What mitigation actions can property owners take?

Recent years have seen the emergence of resilience-linked insurance premiums to mitigate climate-related risk, directly connecting insurance costs to on-the-ground risk reduction.

In Asia Pacific, Link REIT has reported that it successfully reduced its insurance premiums by 11.7% by investing in climate-resilient infrastructure, particularly anti-flood measures, at several properties in its portfolio.5

The company revealed in 2025 that it had conducted a review of its portfolio by net property income across key markets and then assessed the key climate risks affecting its assets. It then implemented climate-risk mitigation solutions tailored to each vulnerability—for example, improved drainage at properties with potential risk of flooding—quantified the lower risk, and informed its insurers of the results.

Link REIT operator Link Asset Management, together with AXA Hong Kong & Macau and Marsh and supported by the Hong Kong Green Finance Association (HKGFA) published these findings in a white paper introducing the model of “Sustainability-Linked Insurance (SLI)”; a property insurance solution that integrates climate risk mitigation and rewards proactive climate risk management.6

Other measures property owners can take include exploring parametric insurance, which provides pre-defined payouts based on specific disaster triggers, and using detailed risk assessments to align insurance with actual, reduced risk profiles.

What is the role of property valuations?

Property valuations are set to take on a key role in abating the impact of climate related events on insurance premiums. While it is not yet a universally standardised practice in every appraisal, some valuers are starting to incorporate climate modelling, particularly for high-risk assets, allowing investors and property owners to better understand future and not just historical vulnerabilities.

By utilising climate risk assessment tools, valuations teams can assess the extent of a property’s climate resilience, provide a clearer picture of future insurability; and assess the risk of potential devaluation.

This approach ensures that building resilience measures, such as anti-flooding infrastructure, are properly reflected in the asset's value. However, valuations will require strong empirical evidence of mitigation measures’ effectiveness to provide a compelling argument that the property is deserving of lower insurance premiums.

For an in-depth discussion about how CBRE can help your organisation manage climate risk, resilience and adaptation measures, please contact Corrado Forcellati & Su-Fern Tan.



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