Extreme weather continues to be one of the most significant threats facing commercial properties across the U.S. One-third of commercial property owners have faced damage from a natural disaster in the past five years, according to a recent Agency Forward survey from Nationwide, with this number jumping to over half (54%) in wildfire-prone states and nearly two-thirds (63%) in hurricane-prone states.

As the frequency and severity of these threats continue to increase, concern among property owners throughout the country is rising. More than two-thirds (67%) of commercial property stakeholders are highly concerned about damages from severe weather and natural disasters, an increase of 5 points from 2023. This concern increases to 93% (up 28 points), and 86% (up 16 points) in wildfire- and hurricane-prone states, respectively.

Property owners are most concerned about damaging winds (88%), flooding (78%), lightning (78%) and tropical storms or hurricanes (75%).

Despite rising concerns, 26% of commercial property owners admit to knowingly carrying inadequate insurance coverage to account for severe weather events, an 8-point increase from 2023. Further, most insurance agents say that at least 2 in 5 commercial clients are underinsured for severe weather events, the report says. And 76% of commercial property owners are actively looking for ways to cut costs on their insurance policies, with 42% willing to reduce insurance coverage to shrink premiums.

Further, commercial property owners are doing less to proactively mitigate risks, Nationwide found. Only 31% of respondents report a willingness to invest in measures to improve their properties. Those who are willing to improve their properties are open to paying up to $10,000 to do so—a 50% decline from 2023 in the amount clients are willing to pay.

And while 95% of commercial property owners claim to have a plan in place to prevent severe weather damage to their business properties, 19% of agents estimate that less than half of their clients have a risk management plan in place to prevent such disruptions.

Just 1 in 3 agents prioritize sharing insurance carrier resources for severe weather risk mitigation with their commercial clients, according to the report, revealing the potential for agents and carriers to play a more significant role in risk mitigation guidance.

"Protection against severe weather requires more than just insurance policies; it demands a robust business continuity plan," said Mark McGhiey, risk management and client services leader at Nationwide. “Without a comprehensive approach that includes both, business owners will be stuck in an endless cycle of financial strain and disruption as weather becomes more dangerous and unpredictable across the U.S., not just on the coasts."

“It's imperative that property owners, agents and carriers work together to bridge these protection gaps and ensure resilience against future climate risks," he added.

Olivia Overman is IA content editor.