How to Keep Your Insurer From Getting Blue During Green Building
By MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance®
Insurance companies have expressed their support for the green building movement, and have even tailored existing products or created new ones to support it. But don't get the wrong impression. They're not falling over themselves to cover every green building project that comes along. Instead, they're cautious and consider each green building on its own merits.
Here's how a green building owner or developer can win over an insurance company, according to advice given by some of the leading property insurers out there.
Perhaps the key lesson to take is that insurers are not automatically going to cover every green building. Just as with any property, the prospective insured needs to win over the insurer, show it the building is a good risk.
One way to do so is to get the insurance company involved earlier on in the building process, even during the design process, said Kurt Husar, senior vice president in ACE's Global Property unit. At least then the insurer can know what the designer and developer are trying to do, what type of technology they're using and the property values involved.
Some developers and building owners "overdesign" when it comes to green buildings, building in room for error. Sure, it could drive up building costs, then insurance premium costs, but it also could reduce the uncertainty of how a given green building will perform.
"When they don't know for sure," said Gary Kaplan, head of construction at Zurich North America. "Some choose to overdesign."
Kaplan also suggested that it will be important for the green building industry to develop standards and consistency over time. That way, underwriters will start to have a record of loss history and proven performance that they can lean on when considering green risks.
Of course, one of the notable--and perhaps more compelling from a design standpoint--features of green buildings are how exceptional and innovative they are. This will always make creating a standard or consistency difficult.
"As emerging technologies evolve, that will be a continual challenge," said Lou Gritzo, vice president of scientific research at property insurer FM Global.
Building owners must keep this in mind when they develop these unique green facilities. They ought to make sure deeper assessments of these unique designs and technologies are carried out to prevent any unintended consequences, such as compromises in loss prevention or long-term cost increases, according to Gritzo. Case in point: alternative energy sources. They could create additional exposures for a building (think solar panels in a hail storm), or at the very least, they might not perform over the life of the building as expected.
Green building owners and developers should integrate good risk management into their sustainability designs, Gritzo said, including understanding and acknowledging old-fashioned risk factors, like a fire. And besides making sure that building products meet energy efficiency and clear air guidelines for green certification, green builders should also add robustness to the list of needed attributes. They don't have to get fancy here; just stick with the loss-prevention standard out there for "regular" buildings.
"The existing loss-prevention standards do a pretty good job," said Gritzo.
October 20, 2009
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