Fireman's Fund Insurance Co. was the first carrier to offer a standard property product with its Certified Green Building Replacement and Green Upgrade coverages, released in October 2006.
For existing green certified buildings, the product offers a premium discount because these buildings are generally considered safer and better built than nongreen structures. Yet the product also covers exposures specific to sustainable construction practices and elements, such as alternative water and energy systems and living roofs.
In typical property policies, explains Rick Hawkinberry, senior vice president with the Willis environmental practice, the plants found on a living roof would not be covered.
Should a green-certified building suffer a total loss, the Fireman's Fund policy would pay out for the building to be resurrected in green form, certified to one level higher than it had been previously. For losses, underwriters take into account the greater replacement value inherent with green materials and practices. Says Steve Bushnell, product director, commercial business, at Fireman's, the additional costs can range from 1 percent to 1.5 percent more than costs of similar nongreen products.
That's also about the additional premium you can expect to pay if you sign on for the Green Upgrade coverage. For policyholders with nongreen buildings, this product would pay to rebuild with green products any property damage to nongreen property. Energy Star rated appliances, carpets and paints with low-volatile compounds for better air quality, efficient plumping and electrical systems, and office partitions sans formaldehyde. In the event of a total loss, the entire rebuild would be done toward getting green certification.
A third product that Fireman's introduced in Oct. 2006 was building commissioning coverage, which pays, in the event of a loss to a green building, to have a commissioning engineer oversee the rebuild to meet certification requirements.
"We end up with a greener building and a safer building," says Bushnell.
So far, the upgrade has been the most popular of the three, reports Bushnell, with upward of 800 insureds buying it. The common denominator among these policyholders is that there is no common theme--buyers have come from different sectors, from small companies to corporations with hundreds of locations.
"There is a general interest that building owners have in being sustainable and green," explains Bushnell, adding that green building is one of the few environmental movements that has a profit motive behind it.
Fireman's Fund is expanding its participation in this movement with new green policies, such as one for manufacturers that incentivizes for sustainable practices in property such as energy efficiency and workers' compensation such as improving the working environment and air quality. The carrier also offers a products liability credit for companies that practice sustainability in their operations. And there's a green commercial auto policy that pays out to replace older "regular" fleet cars with hybrids.
The Allianz-owned, Novato, Calif.-based insurer is not alone in offering these products anymore. Other carriers have come on board and are competing in the green movement.
Liberty Mutual unveiled a property product this April called Green Select. Similar to the Fireman's product, it would pay for existing certified buildings to be rebuilt after a complete loss to one higher level of certification. It would also pay out for debris recycling, vegetative roofs, recommissioning and recertification costs, and the higher prices shelled out for special building products. And, similarly, Green Select would rebuild a nongreen property after a loss to meet certain green aspects.
Both types of cover are included on the same endorsement to RM Select property policy.
"It's easier to put it on one endorsement and deal with it on a scheduled basis," says Ann Butterworth, underwriter for the product.
Lexington's Upgrade to Green property product, announced this spring, covers these two main bases as well--rebuilding and recertifying an existing green building, and upgrading a nongreen property post-loss with green products.
More standard form products such as these are surely on the way. In the meantime, carriers are also writing green risks in the manuscript, one-off, customized way.
Lindene Patton, climate product officer with Zurich, for instance, reports that it currently manuscripts extensions to property policies to cover the unique exposures of a particular green building. The insurer, she says, has standardized green forms currently in the filing process.
Patton says that green building is covered in regular Zurich E&O coverages for architects and engineers, as well as in standard construction and project-specific policies.
Considering the matter further, she adds that even current "nongreen" property forms might cover green exposures. Many cities and counties are changing their building codes to mandate that some construction be done in a green manner. So if a property policy is written to rebuild to code after a loss, then inherently reconstruction would be done in a green manner.
"Cutting edge is extending coverage that might not be regulator mandated but would be appropriate," she says.
MATTHEW BRODSKY is senior editor/Web editor of Risk & Insurance®.
July 1, 2008
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