A read-worthy insight from Deloitte looking at the elevating impacts of climate change on the Insurance costs for CRE in the US. While the article/study covers the correlation between insurance premiums and extreme weather (acute) events, such as floods and hurricanes, it’s worth noting that chronic events such as high volumes of precipitations can cause serious water damages.
✔ My personal takeaway: It’s paramount to have a holistic understanding to the Asset’s exposure to physical climate risks which get integrated in a wider resiliency strategy and action plan.
Here’s a quick summary of the article:
- ▶ Rising Insurance Costs: Due to extreme weather events, insurance premiums for commercial buildings in the U.S. are projected to rise significantly, with an estimated increase from US$2,726 in 2023 to US$4,890 by 2030.
- ▶ Impact of Climate Change: The proliferation of extreme weather due to climate change is leading to higher insurance costs, with a 31% year-over-year increase for buildings in high-risk states.
▶ Billion-Dollar Events: In 2023, there were 28 separate billion-dollar extreme weather events, with recovery costs totaling US$92.9 billion. - 💡 Mitigation Strategies: Building owners are advised to take preventive measures, work with brokers and advisors, consider self-insurance, and possibly relocate to manage and mitigate rising insurance costs.
These points highlight the challenges and potential strategies for commercial real estate owners facing the financial impacts of climate change and extreme weather events.
First published in LinkedIn on June 5, 2024
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