Climate Risk Moves Onto the Radar for Industrial Properties Insurance, but Demand Remains Slow
CNseg says flooding and inundation have been among the leading causes of claims involving engineering projects and high-rise construction in recent years
Torrential rains, tornadoes, floods, inundation, landslides, flash flooding, windstorms, droughts and heat waves are becoming increasingly frequent in Brazil. Events that were once considered sporadic are now occurring more often as the climate crisis intensifies, with studies by Brazil’s National Institute of Meteorology (Inmet) reinforcing the need for greater preparedness.
The growing frequency and severity of extreme weather events are beginning to add a new variable to the management of logistics real estate assets, with the potential to drive up insurance costs and affect the value of a specific location depending on its exposure to climate-related events.
The shift is taking place as the insurance industry pays closer attention to extreme weather. The National Confederation of Insurers (CNseg) says flooding and inundation have been among the leading causes of claims involving engineering projects and high-rise construction in recent years, contributing to higher loss ratios and a more restrictive market for new business. However, industry sources told REsource that demand for this type of protection is still growing slowly.
For industrial properties, the risk extends beyond physical damage to the property itself. A flood can halt operations, damage equipment, compromise inventory and disrupt the movement of goods. As a result, in addition to property insurance, coverage for lost profits and business interruption may become increasingly important for companies operating from these facilities.
“We are seeing greater demand for some coverages that were once typically purchased less frequently. We have an additional coverage known as windstorm, hurricane, cyclone, tornado and hail coverage, which has now become essential as climate-related events occur more frequently,” says Cristina Caldeira, CEO of Unioncorp.
She believes, however, that demand for these coverages is not increasing at the same pace as the occurrence of extreme weather events. “Perhaps it has to do with the way Brazilians think: they always believe that adversity only happens to the ‘neighbor,’” she jokes.
Caldeira points to the floods that hit Rio Grande do Sul in 2024, when few real estate assets had flood insurance. According to figures released at the time, only 10% of the affected properties had some form of insurance coverage.
Climate change also gained additional regulatory relevance last week, when Brazil’s insurance regulator, Susep, published the final report of its Catastrophe Insurance Working Group. The report estimates that approximately 9% of the economic losses caused by climate-related disasters in Brazil are covered by the insurance market, compared with roughly 45% globally. The document puts forward 30 proposals involving insurance products, data, risk modeling, prevention and financial mechanisms.
At the same time, CNSP Resolution No. 496/2026 introduced new general rules for property and casualty insurance contracts. Existing policies must be adapted by January 4, 2027, while the new rules will become mandatory for contracts entered into or renewed as of January 5, 2027. Among other provisions, the regulation establishes guidelines for contract structures and for insurance products covering named perils and operational risks.
For the real estate market, the growing focus on climate risk raises an additional question: if an asset’s climate exposure begins to influence its insurance coverage, policy terms and, ultimately, its insurance costs, the risk of flooding, for example, could cease to be merely an environmental or operational variable and become a more direct component of the economic analysis of logistics properties.
Regions at Greatest Climate Risk
Meanwhile, Brazil’s Southern region is expected to experience above-average rainfall and river flows, while the Southeast, which accounts for the country’s largest concentration of logistics inventory, could face sharp temperature swings as well as exposure to windstorms and hail, raising concerns about asset structures and resilience (see chart).
Climate Risk Is Being Mapped by Insurers
In guidance issued following the floods that hit Rio Grande do Sul, Brazil’s insurance regulator, Susep, recommended reviewing insurance policies to determine whether they include specific coverage for flooding and inundation.
Policies should clearly specify which risks are covered, which are excluded, and under what conditions claims will be paid. In the case of a logistics warehouse, for example, damage caused by flooding may be treated differently under the policy than damage resulting from high winds or heavy rain.
The cost of coverage is also not standardized, and a property’s exposure to climate-related risks may factor into an insurer’s assessment, taking into account variables such as location, the history of weather-related events and the characteristics of the property. In this context, the Climate Risk Tool developed by the National Confederation of Insurers (CNseg), which draws on historical, hydrological, geospatial and climate data, is already being used by the insurance industry to generate risk indicators for flooding, inundation, landslides and lightning strikes in specific locations.
The use of geographic data in underwriting brings climate risk closer to the traditional logic of the real estate market, where location, physical characteristics and infrastructure are key factors in determining an asset’s economic profile. For logistics properties, this can include everything from a history of flooding and proximity to waterways to drainage systems, site elevation and mitigation measures implemented at the property.
