Climate risk is turning insurance and resilience into deal factors

The growing awareness of climate risk is having a profound impact on the way companies approach insurance and resilience, with far-reaching implications for the lease industry. As extreme weather events become more frequent and severe, businesses are recognizing that climate-related losses can have a significant impact on their bottom line. In the EU, for example, it's estimated that only about 25% of climate catastrophe losses are insured, leaving a significant gap in coverage.

This gap is leading buyers to factor long-term costs into their pricing decisions, including the cost of potential climate-related losses and the investments needed to build resilience. For lessors and lessees, this means that lease agreements may need to be reevaluated to account for climate risk. This could involve incorporating climate-related covenants or adjusting lease terms to reflect the increased risk of climate-related disruptions. By doing so, parties can better manage their exposure to climate risk and ensure that they are adequately prepared for potential losses.

As the lease industry continues to grapple with the implications of climate risk, there are several key factors to watch. One is the development of new insurance products and risk management strategies that can help companies mitigate the impact of climate-related losses. Another is the increasing use of data and analytics to assess climate risk and inform decision-making. Finally, market participants should keep a close eye on regulatory developments, such as the EU's Sustainable Finance Disclosure Regulation, which aims to promote transparency and accountability around climate risk. By staying ahead of these trends, lessors and lessees can better navigate the challenges posed by climate risk and build more resilient businesses.

Originally reported by housingwire.com. LeaseNews adds analysis for real estate & property readers.