As physical climate risks intensify, businesses must recognize that resilience is critical to protecting asset values, maintaining insurability and securing investment. This requires that investors and insurers work together to strengthen the places assets depend on.
Physical climate risk deserves business attention, not least for asset protection but also for operating performance, capital expenditure, financing and exit value.
Even if an asset can withstand a hazard, can it continue to operate, attract capital and transfer risk within an economically viable place?
Investment in resilience is therefore important and can meaningfully reduce physical risk but those improvements do not always translate into better insurance outcomes. Without a clear mechanism for recognizing and rewarding risk reduction, businesses may struggle to justify investments that could ultimately benefit asset owners and insurers.
Investments in resilience at both the individual asset level and place-based level – i.e. within the wider area in which the asset sits – can reduce asset-level damage, protect income, reduce downtime, preserve tenant relationships, support financing and improve the quality of insurance outcomes.
How insurability is becoming an investment constraint
Insurability, at its core, is the ability to secure adequate insurance coverage at a price and on terms that support the underlying investment case. In some residential markets, that ability is coming under strain. Rising weather-related losses, inflation and concentration of exposure are all contributing to pressure on capacity and pricing.
For asset managers, insurance availability can affect investment assumptions, operating costs, debt requirements, exit value and the timing of capital expenditure. An individual building may have resilient design features, robust emergency plans and a well-developed insurance programme. Yet its insurability boundary does not stop at the property line.
For example, a building may be well fortified but if stormwater drainage systems in the surrounding area are not adequately managed, flooding can cause prolonged disruption.
These dependencies can affect business continuity, insurance outcomes and asset valuation. They also mean investors should consider place-based conditions alongside asset-level characteristics when assessing risk and deciding where to direct resilience capital.
How to translate asset-level resilience investments into insurance outcomes
The Investing in Resilience Framework offers an insurance-centric approach towards incentivizing asset-level resilience. It suggests four key steps:
Measure the risk: Using forward-looking hazard and loss modelling, what could become financially material over the ownership period and asset life?
Understand the controls: Which physical, operational and business-continuity controls already exist?
Reduce the loss: Which interventions meaningfully reduce expected loss and are economically justified?
Translate the improvement: How can the documented reduction in expected losses be used to engage insurers and determine how those improvements could be reflected in premiums, deductibles, coverage terms or other underwriting incentives?
Better understanding the risk can reinforce that investors should not respond only to a hazard score; they should also assess exposure, existing controls, operational dependencies and remaining vulnerability. Identifying where hazards exist is the first step; next is understanding how investments in resilience can reduce expected financial losses.
With a better understanding of the risk, investors can consider the range of risk-reduction measures available. Risk reduction measures include capital expenditures and operational or soft controls, such as testing generators, updating emergency procedures, moving inventory or strengthening recovery protocols.
The final step is translating resilience into insurance incentives. Options can include more than premium reductions, such as changes to deductibles, sub-limits, capacity, coverage terms, business interruption protection or the availability of multi-year and resilience-linked structures.
Following these steps can help investors secure better terms while insurers benefit from higher-quality submissions, clearer risk selection and more durable portfolios in catastrophe-exposed markets.
Demonstrating what is possible when these principles are put into practice, a landmark collaboration in Hong Kong between Link Asset Management, AXA and Marsh shows how insurers can actively reward resilience investment.
Link quantified its physical risk exposure and made targeted flood resilience investments, securing an 11.7% reduction in property insurance premiums in 2025, doubling the cap on water-damage claims and a two-year agreement in place of the standard annual renewal for more stability.
The model embeds sustainability-linked key performance indicators directly into insurance terms, with a further 7.5% premium reduction tied to lower claims, creating a financial incentive to keep investing in resilience. The example could show what a new generation of insurance products would look like at scale.
Why businesses must invest for resilient places not just resilient assets
Resilience requires action at multiple levels. Businesses can invest in protecting their own facilities and operations but they also depend on surrounding infrastructure and communities.
Similarly, investments in place-based resilience can reduce shared exposure but cannot eliminate the need for asset-specific risk management. Together, these approaches offer a more comprehensive way to reduce physical risk and strengthen insurability.
Organizations can take steps to improve the resilience of the systems on which their activities depend, ranging from strengthening supply chains to protecting their workforce and communities. Many of the most important interventions, such as stormwater drainage protection and wildfire buffers, happen at the place level.
Investing at this level creates a collective action challenge: while these measures benefit many stakeholders, the costs may fall to only a few. No single actor has sufficient incentive or capacity to act alone, making coordination across the property value chain essential.
The World Economic Forum and Marsh recently launched Addressing Insurability: A Playbook for Investing in Place-Based Resilience, which outlines four priority interventions for coalitions to move forward:
Mapping what matters: Improved risk data to build a shared, decision-ready view of place-based risk.
Paying for resilience: Innovative financing structures that pool resources from multiple beneficiaries.
Making resilience count: Standardized metrics that enable insurers and investors to recognize and price resilience consistently.
Realizing co-benefits: A stronger business case for resilience by aligning incentives and capturing co-benefits.
Together, these interventions provide a roadmap for turning place-based resilience from a collective ambition into an investable proposition.
One financing structure discussed in the playbook is the resilience improvement district. Resilience improvement districts, emerging in US states such as Connecticut, ringfence a defined area so that the uplift in property values and tax base created by resilience investment helps pay for it.
OneShoreline, the San Mateo County resilience district in California, plays a similar role for financing coastal protection, connecting municipalities with private capital for engineered and nature-based flood reduction. These financing mechanisms allow asset managers and owners who benefit from a safer place to help create it.
Who takes responsibility for improving asset-based and place-based resilience?
As physical climate risks intensify, maintaining insurability will require a more proactive approach to managing risk. Investors, businesses, insurers and public-sector stakeholders each have a role to play in identifying vulnerabilities, investing in resilience and ensuring those improvements are appropriately recognized.
The Investing in Resilience Framework and the Addressing Insurability Playbook offer complementary approaches, from individual assets to entire communities. The next step is to put these approaches into practice, demonstrate measurable reductions in risk and develop financial mechanisms that reward investments in resilience.
Ultimately, making resilience more financially attractive can help accelerate investment, strengthen insurability and protect long-term economic value.
Discover place-based solutions in our digital repository launched at COP31.
