The cost of climate inaction in real estate: insurance, risk, and value on the line

In 2024, 27 climate disasters cost the U.S. $182 billion – and that may be the last time we know the true cost. The government is pulling back on data. Insurers are pulling out. 

In a troubling turn, the National Oceanic and Atmospheric Administration (NOAA) announced in May 2025 that it would stop tracking the cost of climate-related weather disasters.

In 2024, the United States experienced 27 separate weather or climate disasters that each resulted in at least $1 billion in damages. NOAA map by NCEI.

This decision, under the Trump administration, signals a retreat from federal support for climate data and resilience planning, just as those resources are most urgently needed. As federal data pulls back, insurers are also exiting high-risk markets. And regulators are struggling to keep up.

Properties that once looked like sound investments are now becoming uninsurable. Without insurance, there is no mortgage. Without financing, there is no transaction. And without risk mitigation, the path to value erosion is clear and steep.

This is what climate inaction costs. But there is another path.

With high-quality data, forward-looking analytics, and strategic planning, real estate leaders can stay ahead of risk, build resilience, and protect value. As the sector stands at a crossroads, one message is clear: what you don’t know (and don’t act on) can cost you dearly.

Real estate’s insurance crisis: a market on the brink

Insurance is a foundational pillar of economic security. It enables investment, protects livelihoods, and underpins the real estate market. But climate volatility is now testing the limits of traditional insurance models. In places like California and Florida, major players such as State Farm and Allstate have exited local markets, citing wildfire and flood risks. Indeed, Wildfire risk is also increasing in the US. In January 2025, Los Angeles County faced two of the most destructive wildfires in California’s history, the Palisades Fire and the Eaton Fire, which led to widespread evacuations and significant property loss.

Meanwhile, insurance premiums are rising. In the U.S., insurance is now the fastest-growing expense line item for commercial property owners, directly eroding their net operating income. Notably, at least two-thirds of the insured losses in 2024 can be attributed to the US, with major hurricanes like Helene and Milton causing significant losses. 

In high-risk zones, some properties are no longer insurable at any viable cost. Without insurance, mortgages and renting become impossible. No insurance, no financing, no transaction. This chain reaction can quickly turn once-valuable properties into stranded assets.

The result: a widening “protection gap”, the difference between the economic losses caused by disasters and the portion that is insured. It leaves more people vulnerable and slows the broader transition to a climate-resilient economy.

Fragmented regulation is worsening the crisis

Unlike the federally overseen banking system, U.S. insurance regulation is decentralized. Each state sets its own rules. Some, like California, are introducing stress tests for insurers and mandating climate risk disclosure. Others are doing the opposite: restricting the use of climate science in pricing models.

This regulatory inconsistency allows vulnerabilities to persist and spread. It also hampers insurers’ ability to price risk accurately, build sufficient reserves, or design products that support climate adaptation. Without a coherent national strategy, insurers are left to navigate an increasingly unmanageable risk environment alone.

Data deficiencies and blind spots

On top of regulatory fragmentation is the absence of comprehensive, standardized data. There is currently no national repository of insurance exposure to climate-related risks. This lack of visibility makes it harder for both insurers and regulators to quantify systemic vulnerabilities and prepare for future risks.

Incomplete data results in mispricing, blind spots, and ultimately poor decision-making. The inability to capture climate-adjusted risk at scale is becoming one of the most significant barriers to building a resilient insurance market. Together, regulatory fragmentation and data gaps amplify financial risks. 

The financial risk of climate inaction

Beyond insurance premiums, the financial toll of climate inaction spreads across multiple value levers:

1. Valuation risk

Extreme events diminish asset attractiveness, depress income, and lower long-term value. For example, properties in flood-prone areas are often significantly overvalued. A 2023 study found that U.S. homes in flood zones may be overvalued by up to $237 billion. If pricing is corrected to match actual risk, owners could face a 10% drop in value. That’s a direct hit to equity.

2. Liquidity risk

Illiquid, non-resilient assets struggle to attract investors or buyers.

3. Capital access risk

Access to capital is also becoming an issue, as well as an opportunity. Institutional investors that are allocating their capital have strict criteria that they have to meet as part of their broader corporate strategies. And if assets don’t live up to that strategy, then there is a real risk that could be limited or even cut off.

4. Operational cost risk

Energy-inefficient, vulnerable properties face rising costs across maintenance, retrofits, and downtime. But the financial risks go far beyond operating expenses. Extreme climate events cause billions of dollars in physical damage every year, driving sudden, massive repair and reconstruction costs for property owners. Even when assets are not directly hit, cross-dependencies can create severe financial impacts: if surrounding infrastructure—like roads, public transport, or utilities—is disrupted, tenants, employees, and customers may not be able to access the property, resulting in business interruption, lost income, and potentially long-term occupancy challenges. 

Proactive resilience investments can reverse this trend: according to the World Resources Institute, every $1 spent on climate adaptation can yield $2–$10 in avoided losses. The World Bank estimates that investments in climate-resilient infrastructure can yield a return of $4 for every $1 spent, by avoiding the need for continual repairs and rebuilding.

The good news: while the risks are real, so are the solutions

At this tipping point, traditional insurance is no longer sufficient. Real estate owners need an integrated, data-driven approach to physical risk management. Tools like Deepki’s sustainability platform offer real estate stakeholders a way to proactively manage this risk.

Deepki’s complete sustainability platform helps real estate asset owners manage risk through data-driven insights, improve the financial performance of assets, and comply with sustainability regulations and investor requirements. Certified to ISAE 3000 Type 2  standards, the platform delivers the same data quality expected in financial reporting.

A key component of the platform, Deepki’s Climate Resilience solution, helps Asset and Risk Management teams mitigate physical climate risks through advanced analysis of exposure and vulnerability. Our approach focuses on three key pillars:

1. Exposure

Where are your assets most at risk? Deepki maps exposure to climate hazards such as floods, heatwaves, droughts, and wildfires, using high-resolution location data.

2. Vulnerability

How susceptible is each building to damage? By assessing the physical characteristics, construction materials, age, and maintenance status of each asset, Deepki models vulnerability to climate impacts.

3. Resilience planning

What actions will deliver the best return? Deepki’s experts recommend adaptation strategies – from structural upgrades to energy retrofits – and allow users to track impact and ROI over time.

Climate resilience panel in the Deepki Platform.

Real-world impact: Ream SGR’s story

This challenge becomes even more complex for clients with large portfolios, where tracking and assessing risks across multiple assets is significantly harder. That’s where Deepki comes in.

Take Ream SGR, a leading investment management firm. Since implementing Deepki’s platform, they’ve:

• Automated climate risk data collection
• Improved GRESB ratings
• Identified and executed targeted resilience strategies

“With the Deepki platform, we have the possibility to capture and digitise all the data from our assets, in terms of e.g. energy performance or climate gas emissions, but also to assess physical and transition risks” –  Head of Compliance & Risk Management and Anti Money Laundering, Ream SGR

Making resilience business-as-usual

What’s clear is that climate risk is no longer “non-financial.” It is a financial risk, and must be treated as such. For real estate stakeholders, that means embedding climate resilience into day-to-day decision-making, capital allocation, and governance structures.

It also means shifting the mindset: from reacting to disasters, to anticipating and preventing them. From short-term fixes to long-term value creation. From guesswork to data-driven strategy.

At Deepki, we believe in empowering the real estate sector with the tools it needs to build resilience—because buildings don’t adapt on their own, people do. And in a market where inaction carries rising costs, action is the only safe investment.

Read more on adaptation: building climate-resilient real estate

Our action plans include a wide range of steps—from installing flood barriers and using heat-resistant materials, to improving drainage systems and reducing operational carbon. Clients can also prioritize more straightforward measures, such as switching to LED lighting or adding solar panels.

A key challenge is for portfolio owners to focus their time and energy on higher-risk assets. Being intentional about this is critical. They should understand how to align certain insurance premiums with actual risk data and collaborate with insurers to clarify their mitigation strategies.

While building resilience to today’s physical risks is essential, investing in mitigation is equally crucial. Adaptation and mitigation must go hand-in-hand: protecting assets today, while reducing the severity of tomorrow’s climate impacts.

The time to act is now

Real estate sits at the intersection of two powerful forces: climate change and capital markets. The first is accelerating. The second is watching.

Whether you’re managing a €10B portfolio or a single building, the stakes are the same: protect your assets, or risk losing them. With insurance costs climbing, regulatory scrutiny intensifying, and investor expectations rising, now is the time to move from awareness to action.

The question isn’t whether climate risk affects your portfolio. It’s how ready you are to adapt, protect value, and seize new opportunities.