Key takeaways
- According to the German Insurance Association, natural hazards caused EUR 1.4 billion of losses in property insurance in 2025, with the association expressly warning against reading quieter years as an all-clear.
In debates about the economics of commercial property, rent, financing and energy retrofits dominate. One cost line is systematically underestimated: insurance. Yet according to industry experts, insurance costs are the fastest-growing cost line for commercial real estate of all. For owners who watch their operating-cost calculus and long-term value performance, the interplay of natural hazards, insurability and structural resilience is turning in 2026 from a footnote into a central value lever.
Premiums at record pace
The price increase is substantial. As the trade magazine immobilienmanager reports, insurance premiums for office buildings have risen by an average of eight to twelve percent per year since 2018. Over a span of a few years, that compounds into a multiplication of the original burden. For the owner it feeds directly into non-recoverable or only partly recoverable operating costs and thus erodes the asset's net income.
The driver of this development is the clustering of weather-related loss events. According to the German Insurance Association, natural hazards caused EUR 1.4 billion of losses in property insurance in 2025, with the association expressly warning against reading quieter years as an all-clear. Heavy rain, flooding, backwater and hail increasingly strike commercial operations too, as the specialist service Gewerbeversicherung-Vergleich emphasises. Events once regarded as once-in-a-century now recur at ever shorter intervals — with corresponding consequences for insurers' pricing.
New risk models, new hazard zones
For 2026 the situation sharpens structurally, because insurers are fundamentally overhauling their risk models. Many regions are being reclassified into new, higher hazard zones, with immediate consequences for premiums, deductibles and basic insurability. Without evidence of prevention measures, owners face higher deductibles or, in extreme cases, refusal of cover. This is consequential for property valuation: an asset that cannot be insured against natural hazards, or only on prohibitive terms, loses financeability and thus market value, because lenders require seamless cover.
The link between climate risk and property value is therefore no longer an abstract ESG debate but a concrete valuation question. As Haufe sets out in an analysis of climate rating, physical climate risks increasingly feed into valuation. Assets in flood zones, along watercourses or in regions with high heavy-rain risk will have to reckon with a risk discount going forward, while resilient locations enjoy a relative valuation advantage. This differentiation is only beginning but is likely to sharpen with each recalibration of the risk models.
The gap for commercial property
A political development further sharpens the situation for commercial owners. The federal government is planning mandatory insurance against natural-hazard damage — but initially only for residential buildings. Commercial properties are expressly left out. This means that precisely the assets that often cause the largest single losses do not benefit from a collective protection mechanism that could spread risk more broadly and thus stabilise premiums. Moreover, many existing commercial policies still lack explicit cover against natural hazards, so owners can find themselves unprotected in a loss event without being aware of it.
For the individual owner this regulatory gap means protection must be actively organised in-house; there is no political safety net to fall back on. The first step is an honest inventory of existing cover: does the policy actually cover the relevant natural hazards, or is there a dangerous gap between perceived and actual protection? Given the tightening of risk models, this review is not a formality in 2026 but a business-critical task.
Prevention as investment, not cost block
The decisive insight is that climate resilience is no longer to be understood as a pure cost block but as an investment in value preservation. Owners must invest in the resilience of their buildings to protect assets. Structural prevention measures — backwater valves, flood-adapted use of basements, improved drainage, hail-resistant roofs — not only reduce physical loss risk but increasingly premiums too, because insurers reward evidence of prevention. A defensive obligation thus becomes an active value lever: those who demonstrably build and operate resiliently lower their running costs while securing the insurability, and hence financeability, of their asset.
This logic ties the insurance question closely to the ESG transformation already under way. Physical climate resilience is the second pillar alongside the reduction of carbon emissions and will gain weight in valuation. For institutional investors, who must capture climate risks in their portfolios anyway, the resilience of individual assets becomes a fixed component of due diligence.
From policy to portfolio strategy
For institutional owners and landlords, it is not enough to view the insurance question asset by asset; it increasingly becomes a portfolio strategy. A portfolio whose assets concentrate in similar hazard zones — for example along a watercourse or in a region with high heavy-rain risk — carries a concentration risk that a single loss event can hit disproportionately. The geographic spread of the holdings thus becomes an instrument of risk management in its own right. An investor who, when acquiring, looks solely at yield and location quality without keeping the portfolio's cumulative natural-hazard exposure in view unwittingly builds a concentration risk that only becomes visible in a loss event.
A further aspect concerns the data basis. Insurers' recalibration of risk models rests on ever more granular geodata, mapping flood probabilities, slope gradients, degrees of sealing and historical loss records at a fine-grained level. Owners who use the same data sources can anticipate the insurers' assessment of their assets and steer proactively before an upgrade to a higher hazard zone occurs. This symmetry of information is an underestimated competitive advantage: those who know their portfolio's exposure as precisely as their insurer negotiate from a stronger position and can prioritise prevention investment where it has the greatest effect on premium and insurability.
The interlocking with financing also deserves attention. Lenders require seamless cover against natural hazards as a precondition for lending. If an asset is reclassified into a higher hazard zone and cover becomes more expensive or impossible, this can impair not just the market value but directly the financeability. In the extreme, a refinancing can trigger a demand for additional equity or a refusal of follow-on financing. Climate resilience thus becomes a factor touching an asset's entire capital structure and is not confined to operating costs.
Finally, it is becoming apparent that transparency over physical climate risks will in future be demanded by supervisory rules and reporting obligations too. Institutional investors must capture and disclose physical climate risks in their portfolios, which turns the resilience of individual assets from a voluntary extra into a documentation requirement. Assets with robust resilience evidence thereby become not only cheaper to insure but acquirable at all for a growing circle of institutional buyers — a liquidity advantage that can translate into a better price on sale.
What this means for principals: insurance costs are the fastest-growing cost line for commercial real estate, and the recalibration of risk models in 2026 will push them further. The planned mandatory natural-hazard insurance excludes commercial assets, so owners must organise protection on their own responsibility — starting with an honest check of whether existing cover actually captures the relevant natural hazards. The right strategic response is to treat climate resilience as a value lever rather than a cost block: structural prevention lowers premiums, secures insurability and thereby directly protects financeability and market value. Owners who integrate these connections early into their acquisition and operating decisions gain an edge before the market fully prices the risk differentiation.