Insuring Your Green Investment

By Matt Baker

It is the hope of every forward-thinking developer that sometime in the near future, the prices for sustainable building systems and materials will be competitive with their conventional counterparts. In the meantime, those that do take the green leap are content to know that the extra initial cost of installing green technologies will be made up by the eventual energy savings. Every property is an investment, but this delayed payoff adds a deeper sense of investiture to green buildings.
So what happens when a fire consumes your spray-in cellulose insulation, or a flood swells your reclaimed flooring? Wind turbines can generate extra power, but perhaps a little too much in the case of a tornado. That extra few percent paid to install these systems is not only lost, most insurance companies won’t cover the extra cost to reinstall them in a rebuild.

A few insurers are seeing the future, however. In 2006, Fireman’s Fund Insurance, a subsidiary of Munich-based Allianz Group, began offering green insurance to commercial property owners of green certified structures. Since then, they’ve expanded the coverage to manufacturing and residential buildings. The residential coverage started in June of this year with a pilot program in Illinois. By August, the coverage had expanded to twenty-five more states.

“Certainly with regard to green homes and in the insurance arena, this is an important leadership move,” said Michelle Moore, U.S. Green Building Council vice president of policy and public affairs. “It’s a bellwether to green practices in the home-building markets at large.”

The green insurance plans allow for owners of green certified property to replace, at an adjusted premium, various green elements where other insurance companies might balk. These include vegetative roofs and alternative power-generating systems like geothermal and photovoltaic. They will also cover the cost for a LEED-AP architect or designer, which would likely be necessary to ensure that the new structure can be properly certified.

The plan is also offered to owners of conventional, inefficient buildings. Again, for a premium, an enrollee in the green coverage plan can upgrade to more sustainable systems and materials in the case of a covered loss. Fireman’s Fund says they will honor the higher costs of low-VOC paints and carpet, insulation, more efficient lighting and plumbing systems, FSC-certified wood and Energy Star-rated equipment. In the case of a total loss, enrollees can rebuild a green certified structure.

The inclusion of residential property is especially significant. “We believe this is a trend-setting insurance solution for homeowners who are interested in the many benefits of ‘going green’ at home,” said Donald Soss, chief underwriting officer for Fireman’s Fund Personal Insurance. America’s green movement has so far been largely municipally-subsidized and/or driven by companies looking to increase their market appeal. There are plenty of environmentally conscious homeowners who simply don’t have the capital to upgrade to greener systems. With this type of coverage, they can at least improve their home to be more sustainable in the unfortunate case of a disaster.

Other companies offer green insurance as well, such as AIG subsidiary Lexington Insurance Company, St. Paul, MN based Travelers Insurance and New Jersey based Chubb. Each claims trailblazing status. Whichever company was the first to offer green insurance is irrelevant; the fact that several offer it is the more important statistic.

On the other hand, some insurers have pointed out the possible risks associated with green design. Stuart Blackie, risk management consultant at Swiss insurer Zurich, for example, wrote in a 2006 report of the possible higher likelihood of fire damage associated with a vegetative roof, were that roof to become dry through poor upkeep or after a drought. “The issue of fire spread, combustibility and indeed fire safety are often overlooked,” Blackie said, suggesting further that the insurer should be consulted as early as the design stage. When pressed, Zurich said it would not deny coverage to structures with vegetative roofs, so long as “appropriate guidelines have been followed.”

But Dusty Gedge, co-founder of LivingRoofs.org, said he thought that some insurance firms were not properly researching the matter. “Fire, quite rightly, is very emotive but we need to realize that there are a thousand square meters of green roofs in Germany, Switzerland and Austria. And fire has not been an issue.”

“The issue is not the technology,” says Jörg Breuning, of Green Roof Service, LLC. “Is it a language problem, mentality problem, deficit of flexibility, ignorance, arrogance, naiveté or the fear of nature? I don’t know.” Gedge echoed this sentiment. “In my experience of 10 years of trying to promote green roofs in the UK, fear, ignorance and construction conservatism has been endemic.”

But the impediments to green building may give way if green insurance takes root. If property owners, both commercial and residential, determine that an inefficient structure is less desirable on the market, more will want to make the conversion. Green insurance can provide the seed for those without the mandated capital to eventually go green, making green insurance not only an investment safeguard, but a way to vault over those hurdles facing the green movement.

Tags:

See All Tags

Suggest an article

Send us your articles! Please email any articles or topics that you think we should feature to Editor@Sustainable-Chicago.com.

Comments are closed.