Climate-Resilient Building Designs Mitigate Insurance Risks

Marsh and Hongkong Land unveiled a study showing that climate-resilient building designs can sharply mitigate physical damage and preserve asset values despite the increasingly challenging insurance landscape. The report, "Building Value That Lasts," focuses on Hongkong Land's Westbund Central project in Shanghai, revealing how resilience features can cut average annual losses from storm surges by 84% and from rainfall flooding by 88% under current climate conditions. This comes as property insurers tighten underwriting guidelines, increase premiums, and adjust coverage terms in response to heightened environmental risks. According to the study, neglecting climate adaptation strategies could lead to more than a doubling in storm-surge losses and a tripling of wind damage at high-risk sites by 2050 under a high-emissions scenario.

Engineering for Resilience

To combat climate risks, the Westbund Central development employs several engineering measures. The project boosts drainage capacity by 23% for severe storm events and features top-grade waterproofed basements. Additionally, critical machinery has been elevated, and a "Sponge City" stormwater management system with a capacity of 2,000 cubic meters has been installed. Such initiatives contribute to projected reductions in storm-surge losses to just 0.12% by 2050, compared to 0.38% for non-resilient infrastructures today. Similarly, anticipated rainfall-flood losses could fall to 0.05% down from 0.19% currently, while wind-related losses could decrease by 31% in 2050.

Building a Collaborative Climate Strategy

Marsh and Hongkong Land executives advocate for a collaborative approach among developers, lenders, and insurers to push forward climate resilience as a standard component of new projects. They note that most climate disclosures lack quantification of returns on adaptation investments, which highlights an opportunity for the sector to focus on standardized resilience metrics. Integrating such metrics early in the design stages not only enhances protection against climate risks but also aids in maintaining stable risk profiles for insurers and property owners alike.