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By MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance®

The roof of the California Academy of Sciences is part nature park, part uphill climb. This 197,000-square-foot green roof is punctured with portholes that provide daylight to a rainforest exhibited in the museum beneath, and ventilation holes to help with the energy efficiency essential to a LEED-certified structure. The roof is sloped in spots at 60 degrees and is located in San Francisco. A hilly building in earthquake country ... hmm?

"It was a real tightrope walk between structural integrity and daylight and natural ventilation," she said of the $500 million project, which became the world's largest Platinum-rated building, the highest rating available from the Leadership in Energy and Environmental Design program.

They pulled off the feat like Philippe Petit. Pulled it off so well, indeed, that this most green of museums could be more resilient, more durable, more designed from a risk management perspective than your "typical" ungreen, built-to-code museum.

How can this be? Because the green building process, by its very nature, produces structures designed to perform better against many risks they face, whether it be hurricane, earthquake, fire, climate change-related flooding, what have you.

As design professionals tell it, the level of rigor is far greater, the technology state of the art, the designers the most talented. The green design process is integrated to ensure that every system in a building--energy, water, sewage, fire, etc.--works together. It is reviewed rigorously, commissioned by third parties.

"The upshot is you get a building that is more carefully designed and more carefully built than a typical code-based building, and that will result in a more resilient building," said Andy Thompson, head of the Americas risk consulting business at Arup.

"What we're talking about is the maximum bar in a certain situation," added Thompson's colleague Rogers.

About 421 of the 3,108 LEED-certified buildings in the United States exist in California. Another 110 are in Florida. That's then 531 buildings that insurers have to worry less about from a hurricane and earthquake loss prevention perspective, correct?

INSURERS: CAUTIOUS LOT

Convincing insures of this is another story however. Sure, many of the leading property carriers have launched new commercial green-related products in the last couple years.

Yet insurers still see more question marks than anything when looking at green building.

They're concerned by the "untested" nature of some of the building designs, systems and materials. No library of loss data has accumulated yet. Uncertainty abounds.

"The more uncertainty there is, the higher the cost of risk," said Gary Kaplan, president of construction at Zurich North America Commercial.

They wonder about the accuracy of replacement values for these buildings. The products and designs tend to cost more than standard fare. Construction can take longer too. After a fire, for instance, using "normal" building products, a structure could be rebuilt in, say, nine months, but it could take a year and a half for green because its special components might be harder to come by. An insurer would have to incur the cost of putting the insured up in a rental for that additional time, explained Kurt Husar, senior vice president in ACE's Global Property unit.

If ever there were a poster child for uncertainty for insurers, it would be the green roof. It doesn't necessarily have to be the 60-degree-sloping variety. Throw some dirt and grass and maybe a tree and a squirrel or two up on a roof, and insurers get nervous.

What impact will maintenance quality play on roof stability? Will the roof hold up if there is a huge downpour followed by a cold spell and ice formation? What will be the impact of decaying organic material on the roof covering system? (Let alone the what-ifs from a large wind event).

"These are the things that keep me up some nights," said Kaplan.

"We just don't know. It's a different system than what you're typically used to," said Husar. "Let's understand a little bit more about this before we rush in and cover that."

It all comes down to insurers' conservative, safe-than-sorry nature, right? Or is it that insurers just don't get it?

"The insurance industry is indeed embracing green building to some degree," said Thompson. "But I would say that the insurance industry has really not yet grasped the benefits of green building in terms of resiliency."

And don't get Rogers started on this topic. While admitting that there isn't much of a body of data on how these buildings perform, she couldn't stress enough that, to appreciate the high-performance design of a green building, you have to look at these buildings individually.

"Isn't that what we should be doing anyway," she said. "My advice is: Look at assets in a specific situation rather than pining away for tables of data that we insure and reinsure risks that we don't understand anyway."

COMING TOGETHER

But to be fair to insurers, they are actually more in agreement than not.

Just listen to Husar's answer when asked whether green buildings, overall, are better built and more resilient than "regular" buildings. He said that he can't make that generalization. Every building must be examined individually and on its own merits.

"How is this designed to handle that particular situation?" he asked rhetorically.

It's all about answering that question with as much information as possible, even allowing for insurer input and inquiry during the design process to convince insurers a building will stand up.

The more unique a design, the deeper these assessments need to be, to make sure the innovative green designs or products are not introducing any unintended consequences or loss prevention compromises, according to Lou Gritzo, vice president of scientific research at FM Global.

Again, this is essentially what green building experts are saying. It is exactly what Arup did on the California Academy of Sciences project. Rogers recalled how a full-scale mockup was created, an unusual step warranted by the unusual design. Then they presented the design and the performance data from the mockup to five or six different insurers. Ultimately, Zurich signed on to the project, which Rogers suspects happened only because Zurich was the lone insurer that had an engineer on its team.

Just as it's in the best interests of insurers to embrace the durability of green building, it also behooves the sustainability crowd to embrace the insurers' focus on loss prevention. A green building that withstands a fire or a quake is better than one that doesn't from a sustainability POV.

"The carbon footprint of a major disaster or a major fire is huge," said Thompson, recommending you Google "carbon footprint Katrina" to see just what he means.

From indications, it would appear that insurers, sustainability experts, designers and building owners are getting this: that sustainability and loss prevention really do go together.

Gritzo knows of some "savvy" clients already out there building to meet certain LEED certifications while also meeting FM Global loss prevention standards.

"Over the long haul, good risk management is integral to sustainability. It's an inherent part of it," Gritzo said, echoing what Arup's Thompson believes. "There are no inherent conflicts. It's a very natural fit between preventing losses and being truly sustainable."

FM Global, he added, is already working on loss prevention standards for green roofs and wind turbines.

In our ever-greening world, you can even imagine some form of LEED-like certification that takes into account just how well built, from a risk management perspective, a green building is.

David Gottfried, who founded the U.S. and World Green Building Councils, the authority behind the LEED system, and now a green consultant and venture advisor with Regenerative Ventures, said he's had talks about building a new coalition of the "disaster resiliency industry" with all stakeholders at the table--insurers, catastrophe experts, engineers and designers, building owners--to set up such a program.

"I could see how it could easily come together and have its own rating system and supporting coalition," he said.

October 15, 2009

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