By Stephen G. Bushnell CPCU ARM, Director Product Development, Commercial Business, Fireman’s Fund Insurance Company
The Front Edge in Insurance:
Fireman’s Fund Insurance Company is on the front edge of financial protection for green buildings as the first and only insurance company to develop a series of commercial insurance products, risk management tools and policyholder information addressing the special risks and recognizing the superior features of green buildings.
Green buildings have moved into the mainstream due largely to the profound value proposition they bring (energy efficiency, superior indoor air quality, lower absenteeism, higher retail sales, tenants willing to pay higher rents) and their significant environmental benefits (lower green house gas generation, water conservation, reduced pressure on landfills). We fully expect that Green construction will become the “standard” over the next two years as building owners recognize the benefits and municipalities mandate green construction (as have Boston and Washington D.C., among others).
Fireman’s Fund® understands that green buildings have physical features that may not be fully covered by traditional property insurance policies (vegetative roofs, alternative power equipment and water systems) and has crafted the coverage green building owners need to fully protect their investment. The coverage form also includes coverage to divert debris from landfills following a loss and costs to completely flush out the building following post-loss reconstruction. Many green buildings use their alternative power generation equipment to sell excess power back to the grid; we provide coverage for the loss of this income if the equipment is damaged in a loss as well as the cost to purchase replacement power while the equipment is being replaced.
The commissioning process that certified green buildings undergo directly addresses the most common causes of property loss we pay: electric fires, HVAC fires and plumbing leaks. Commissioning means these systems are not only more efficient, they are safer. Accordingly, we offer our Certified Green Building coverage at a reduced price.
We take this a step further with our Building Commissioning Expense coverage. Following a loss we will pay for the building owner to hire a professional engineer to commission the repaired or replaced building systems. The building is more efficient and safer. As an additional benefit, we will pay for the engineer to “test and balance” the HVAC system to optimize its performance.
Green Building owners have made significant capital and emotional investments in their properties. They deserve proper protection and an insurance partner who understands their commitment.
Barriers to Growth:
Insurance companies typically face legal and regulatory barriers as they introduce new coverages. That was not the case for these “Green” products. State Departments of Insurance recognized the value and quickly approved the coverage filing. The market has enthusiastically received the coverages. The Green Building Community is excited that a major insurance company recognizes the value of their work. Green and traditional building owners need coverages that both protect their investment and offers them the opportunity to become greener.
As a large commercial insurer, our obstacles lie in the prospect of the increased risk of obsolete buildings and the unpredictable catastrophe exposure of climate change.
The proliferation of green buildings, supported by the demands of tenants for green space, poses a real risk of obsolescence for traditional buildings. In addition, climate change experts hold that a majority of traditional buildings in the US must become carbon neutral (through energy efficient/green energy generation upgrades or purchase of renewable energy certificates – RECs) if we are to avoid irreversible climate change.
Fireman’s Fund offers a solution for these traditional buildings – our Green Upgrade coverage. Following a loss, we will use green, energy/water efficient products and components in the repair or reconstruction of the building. Other insurance coverages will only replace with “like kind and quality” materials, essentially returning the building to its pre-loss traditional state. If the building suffers a total loss, we will rebuild as a “certified” green building (based on USGBC’s LEED Rating System), including the costs to hire a LEED Accredited Professional to assist in the redesign and the cost of the LEED registration and certification fees.
Stephen G. Bushnell is the Director Product Development for Commercial Business at Fireman’s Fund Insurance Company
February 20th, 2007 at 9:59 am There are two market-based non-regulatory actions that the insurance and reinsurance sector could take that would drive rapid and positive change. They are aligned with the interests of the insurance sectors survival and address climate change head-on in a targeted and high-leverage way. The reinsurance companies will have to drive this so that all insurance companies are required to do it or it will encounter short-term competitive problems between insurance companies competing for business without regard to long-term consequences. The two actions are, first, require continuing education in climate realities and sector-specific climate neutral and climate-beneficial best practices for the key decision makers in an entity with significant climate impact in order to renew or secure insurance. Second, develop climate-performance-based rate structures - if you have big negative climate impacts you pay sky high premiums for your insurance and improving your climate preformance improves your insurance rates. There is no other entity in the position to do this or with the resources, motivation and alignment of financial interests. They already recognize what is happening and what is at risk but they have yet to see that they are in this position to both inform in no uncertain terms what is happening and what must change and provide direct financial incentives based on well established policies of making high-risk activities pay their way. If you smoke and drink you pay more for health insurance, if you live in flood-, fire-, earthquake- or hurricane-prone areas you pay more for building insurance, if you have lots of accidents you pay more for car insurance. If you are causing greater risk for everyone, including the insurance companies, you should be paying much higher rates for your insurance. This wouldn’t be environmentalists telling corporate CEOs, COOs, CFOs and their boards of directors about the realities of riks and climate change, it would be one of the most conservative sectors on the planet telling them what’s real and what they can do about it right now. The process of developing that continuing education curriculum could help fund and support the people and organizations that have been working on these issues with little funding or support for decades while the rest of the world paid little attention. And it could bring a lot of related interests and realities into focus in a powerful and coordinated way. I run a small non-profit organization that has been working to get this message up into view for some time, along with our work to help the building regulatory community see the rest of the risk profile associated with buildings - the risks we shift from the building site to the natural systems on the planet, our life support systems and from the present to the future - to our children and grandchildren and to future generations of all species on whose welfare our welfare also depends.