Abstract

Rising global temperatures are increasing the frequency and severity of extreme weather events, driving up insured losses and testing business resilience worldwide. This case study focuses on how Link Asset Management Limited, a leading Asia-Pacific real estate investor and manager headquartered in the Hong Kong Special Administrative Region (Hong Kong), navigated the aftermath of a record-breaking Black Rainstorm in September 2023.

The storm severely flooded Link’s car parks and disrupted shopping mall operations for eight tenant businesses, triggering a fifty-four-day recovery period. In the aftermath, Link faced a number of critical challenges: rising insurance premiums, constrained coverage options, and limited capacity to protect its tenants. These pressures compelled the company to re-evaluate the conventional insurance framework and seek a more innovative and sustainable risk-management model.

This case captures the critical events that led Link to pioneer Asia's first Sustainability-Linked Insurance program. This innovative property insurance model integrates climate risk impact and mitigation measures into its framework, creating a mechanism that rewards and continuously incentivizes sustainable business practices across both short and long-term horizons.

Through this case study, students will develop a comprehensive understanding of how climate risks are disrupting traditional insurance frameworks. They can examine the complexities of transforming established insurance models while gaining practical insights into industry operations, particularly the strategic role of insurance brokers. The case also provides a platform for students to formulate innovative solutions to climate-driven challenges, while developing critical thinking skills essential for analyzing complicated real-world problems and developing strategic recommendations in sustainable risk management.

Learning Objectives

Upon completion of this case study, students will be able to:

1. Evaluate the direct threats that escalating climate risks pose to business continuity and financial stability

2. Analyze how climate change is disrupting conventional insurance models and reshaping industry practices

3. Develop an innovative solution for businesses to change from reactive insurance purchasing to proactive climate resilience

4. Identify key internal and external implementation barriers that businesses face when adopting sustainable risk-management strategies

5. Assess the value proposition of insurance brokers and critically evaluate their role in advancing innovative climate insurance solutions