A Conversation with Dr. Calvin Lee Kwan on Link’s Risk Insurance Premium
By Dr. Calvin Lee Kwan 24 February, 2025
Despite rising climate risks, Link's proactive adaptation efforts secured a material insurance premium cut. We talk to Link's Sustainability & Risk Governance Head on how to turn climate action into savings
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The September 2023 record-breaking black rainstorm In Hong Kong that flooded multiple Link Asset Management assets was an aha moment for Link (the largest REIT in Asia). It identified the trend of rising insurance premiums due to increasingly severe and frequent extreme weather events. To tackle this, Link has been investing millions into flood resilience measures and more than that went on a insurance roadshow to showcase their adaptation efforts, which lead to a notable reduction in their insurance premium. We sit down with Dr. Calvin Lee Kwan, Sustainability & Risk Governance Head of Link, to get all the details of their journey to achieving this innovative win-win strategy for them & their insurers.
CWR: Thanks for sitting down with us. Link has managed to get a reduction in its property all risk insurance premium. Can you tell us what kickstarted this journey towards sustainability-linked insurance?
Dr. Calvin Lee Kwan (CLK): In a year where ESG fatigue and the “anti-woke” backlash have mounted, we’ve sharpened our approach to sustainability by focusing on protecting and creating value for key stakeholders.
In the context of climate resilience, this means not only safeguarding our assets (protecting value), but also achieving material cost savings through lower insurance premiums (creating value).
Link has invested >HKD$5mn since 2023 record rainstorm…
….but most importantly, that event helped identify a trend of rising insurance premiums due to increasingly severe & frequent extreme events
The record-breaking black rainstorm in September 2023, when multiple Link assets were impacted by flooding, further accelerated this journey. Link has since invested more than HKD$5million into flood resilience improvements, but most importantly, this incident helped us identify a trend of rising insurance premiums due to increasingly severe and frequent extreme events.
To tackle this, we began in-depth engagements with our insurance team and broker to explore how to better communicate our climate resilience efforts with insurers.
CWR: Clearly, the insurers responded to Link’s concrete measures to tackle future typhoon and flood risks. Can you share with us what those measures were?
CLK: We’ve always taken a proactive approach to mitigating these risks through six key strategies:
- Regular Climate Risk Assessments
- Targeted Asset Enhancement Works
- Well-Drilled Standard Operating Procedures
- Proactive Drainage System Repairs and Maintenance
- Community-Wide Stakeholder Coordination
- Efficient Recovery
A snapshot of key highlights for each of these approaches can be found in the graphic below:
CWR: Once these improvements were made, how did you engage with insurers?
CLK: To communicate these proactive climate adaptation efforts with insurers, Link and its broker Marsh organised a sustainability-focused insurance roadshow in September 2024.
Went on insurance roadshow to showcase Link’s adaptation efforts
With 22 insurance companies present, Link showcased its robust risk management approach and operational resilience to extreme weather events despite the losses incurred due to the 2023 rainstorms.
CWR: Can you share some of the results with us?
CLK: As a direct result of the insurance roadshow and POC, Link achieved a material insurance premium reduction in December 2024. Our water damage sub-limit was also relaxed significantly.
| “When assessing real estate portfolios, it is important to consider what the insured is doing to mitigate their risk exposure. Detailed information on risk mitigation measures put in place helps to provide a deeper understanding of individual assets, thereby generating an increased level of comfort among underwriters. We welcome the efforts made by Link REIT to make their assets more resilient and sustainable, and are pleased to show our support through promising insurance capacity and T&Cs. Extreme weather and climate risk are real issues for real estate and best tackled when all stakeholders work together.” – Quoted by one insurer on anonymous basis |
Achieved a material insurance premium reduction in Dec 2024…
…& for the first time, Link’s lead insurer offered a 2yr programme instead of annual renewals demonstrating confidence in their risk mitigation efforts
Moreover, looking to the future, Link’s lead insurer offered a two-year programme instead of annual renewals for the first time, demonstrating confidence in Link’s risk mitigation efforts. Link can also achieve an additional premium reduction in the second year if the loss ratio in the first year does not exceed 60%.
We also conducted a sustainability-linked insurance proof-of-concept (POC) with AXA on Temple Mall North, concluding that a further 10-20% premium reduction is feasible if we improve flood resilience measures even more.
This KPI-driven incentive, combined with the POC, have led Link to invest another HK$3million into flood resilience measures across 25 assets, including 58 flood gates, 28 pipe rerouting/installations and five new sump pumps to be completed by the end of 2025.
CWR: This nexus between climate resilience and insurance is certainly innovative and beneficial to both asset managers and insurers alike. Can it be applied to the wider industry?
CLK: Yes certainly. For asset managers, it’s not just about the Climate Value at Risk (CvaR); climate resilience can help mitigate premium increases due to extreme events and may even achieve material cost savings. For insurance companies, improved climate resilience means lower risk exposure and potential losses.
This win-win synergy does not only apply to existing buildings, but potentially even new developments & retrofits
This win-win synergy does not only apply to existing buildings, but potentially even new developments and retrofits that are exposed to physical climate risks and require insurance coverage.
To further drive industry action, Link will be publishing a White Paper on Sustainability-Linked Insurance alongside AXA and Marsh in April 2025, so stay tuned for more details on Link’s improved insurance terms.
Further readings
- CWR talks to Link REIT on Building Low-Regret Resilience – Link REIT had CWR stress test its GBA portfolio against IPCC “low-regret” scenarios. We chat with Dr. Kwan, Head of Sustainability & Risk Governance, on being early movers and discuss key findings & benefits
- Escalating Flood Costs & Compounding Events Test Financial Resilience – Compound extreme events could trigger systemic shocks across the financial industry. CWR’s Dharisha Mirando suggests ways to build better resilience
- Making the Most of Disaster Recovery – Interview with Piet Dircke, Global Advisor Climate Adaptation at Arcadis — Our adaptation efforts will not stand up to future natural disasters according to Dircke, Global Advisor for Climate Adaptation at Arcadis. Why is this? What should we be doing instead? We chat with Dircke to find out
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