AXA, Marsh, Link introduce sustainability-linked insurance model

This is due to real estate and insurance industries facing rising risks from NatCat.

Insurers are facing increasing losses, with global insured losses from natural disasters reaching $140b in 2024. In response, companies have raised premiums and tightened policy terms, but these measures are proving unsustainable, according to a recent whitepaper.

AXA Hong Kong & Macau (AXA), Marsh, and Link Asset Management (Link), with support from the Hong Kong Green Finance Association (HKGFA), released a white paper titled "Sustainability-Linked Insurance: Rewarding Climate Risk Adaptation." 

The paper introduces Sustainability-Linked Insurance (SLI), a property insurance solution that integrates climate risk mitigation and incentivises resilience investments.

The real estate and insurance industries in Asia face rising financial risks due to extreme weather events. Following Super Typhoon Mangkhut in 2018, insurance premiums surged.

Furthermore, SLI can create financial benefits for real estate firms. Traditionally, insurers have reacted to extreme weather by focusing on claims and premium hikes. 

By assessing climate risks and making targeted resilience investments, Link, with support from Marsh Hong Kong, reduced its property insurance premiums by 11.7%, surpassing the industry average of 3%. 

It also secured an additional 7.5% reduction tied to its loss ratio, creating a direct financial incentive for long-term climate preparedness.