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Updating the Uptake of Green Insurance
The U.S. Green Building Council released a top-10 list of states with the most green building in them, but the experience of insurers selling green coverages can't be itemized on a list.
By MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance® It doesn't match too well when you compare where and how commercial insurance companies sell green insurance policies with the recent top-10 list put out by the U.S. Green Building Council (USGBC).
We talked with two commercial insurers that provide insurance products tailored for such certified buildings, or for upgrading properties with certification after a loss. What they've seen in the marketplace for green insurance doesn't necessary match up with the USGBC list for several reasons. One important thing to keep in mind about green insurance products, as pointed out by William Hazelton, executive vice president of ACE Environmental Risk, is that the decision to purchase can be project specific or property owner specific. Just look at where Fireman's Fund, the pioneer in these products, sold its first green product in 2006: to an apartment complex in Alabama. "Which defies what you normally think," said Stephen Bushnell, senior director of emerging industries for the company. "It's kind of been all over the place since then," he added. Fireman's has sold green forms in all 50 states. But a vast majority of clients, particularly for the green upgrade products, are either in real estate or hospitality (with manufacturing coming a distant third). "It's been a construction phenomenon for us for the most part," Hazelton said, though he added that ACE has also seen interest from healthcare firms and public entities, as well as commercial mixed use in the past. The uptake at ACE for its green products has been as well as expected, though the slow-down in the construction business has had its effects. "We still have great opportunities," Hazelton assured. For Fireman's Fund, they went into the market not knowing what to expect, so the attraction of green products was a nice eye-opener. "Seeing our competitors all fall in line behind us ... as fast as they did once it started, surprised us," Bushnell said. For its own book of business, from 2006 through 2009, Fireman's Fund saw total premium for accounts purchasing green insurance go up, to $153 million in 2009 from $39 million in 2007. This year, Bushnell expects that trend to level out. Most surprising for Bushnell during this time has been the "strong" interest from small businesses. But why doesn't this growth of green insurance products among smaller businesses and large companies match the USGBC's list? For starters, Hazelton said, the USGBC list is based on population. This statistical method skews the list toward less populous areas. (Scot Horst, senior vice president of LEED at the USGBC, said in a statement that it was done that way "as a reminder" about the people who live and work in and near these buildings.) Another reason the insurance market differs is simply because insurers tend to get varying premium flows from different parts of the country. Fireman's Fund, a Novato-Calif.-based subsidiary of Allianz, sells more on the West Coast than on the East Coast, and even more so than in the Midwest, explained Bushnell. It makes sense that sales for a niche product--green insurance in this case--would follow that general trend. The USGBC is the nonprofit organization that oversees the LEED certification project, the top way for U.S. property owners and managers to attain green certification. March 15, 2011 Copyright 2011© LRP Publications |
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