No matter where one stands on the issue of global warming, thereare practical reasons for Main Street producers to embrace theenvironmental movement. Because by doing so, they can address aburgeoning insurance need among their small- and midsizecustomers—and grow their own books.

As both energy costs and greenconsciousness continue to rise, commercial clients of all sizes,and homeowners, are adopting new technology and building techniquesto help them cut consumption.

These investments have sparked a growing demand today forenvironmental insurance solutions, and carriers are providing anincreasing number of offerings to meet the needs of a market thatis expected to become even larger in the years ahead.

Fireman's Fund: Small Surprise

When Fireman's Fund Insurance Co. launched its green coverage in2006, the feeling was that the primary interest would come fromlarge commercial real-estate players, said Stephen Bushnell, seniordirector of emerging industries for the Novato, Calif.-basedcompany.

As a result, its initial coverage was targeted to coverreplacement for LEED (Leadership in Energy and EnvironmentalDesign) construction.

But unexpectedly, Mr. Bushnell said, it turned out that manymiddle-market and small accounts showed interest in greencoverage—not so much for LEED certification, but to go beyondreplacement cost after a loss and to be able to upgrade theproperty with environmentally friendly materials.

“We did not expect small business to be that tuned into green,”he said. “Our small-business underwriters tell us that this is abig differentiator when they are out there selling theirproducts.”

He added: “The future for environmental insurance is strong.Utility bills are only going up. And even if the price of oil andgas goes down a little, the environment remains a concern. Morecontractors and architects are seeing the benefit. It is not toomuch of a stretch to say that LEED will be the way to buildbuildings [going forward].”

The Hartford's Hybrid Aproach

At The Hartford Financial Services Group, the company has beendeveloping a portfolio of products covering the green space,running from property to inland marine to commercial auto and somepersonal lines.

Scott Shapiro, the company's senior vice president of appliedresearch and product development, said customers have a growinginterest in securing coverage to replace or upgrade their propertywith green-compliant products if there is a loss.

Unveiled in 2009 for middle-market commercial customers, theHartford offers $100,000 property-loss replacement with greenalternatives. Commercial auto policyholders can secure a policy tohelp them upgrade to hybrid vehicles after a loss.

New on tap, the company has introduced a policy that allowshomeowners to purchase optional coverage to rebuild to greenstandards.

The company also has a variety of new coverages for commercialmarine, builders and other markets seeking to becomeenvironmentally friendly and meet LEED standards, Mr. Shapirosaid.

There is also coverage beingoffered for equipment breakdown in a business-owners policy. Thiscoverage allows policyholders to move to environmentally efficientequipment.

“As new capabilities come online, we want to make sure we keepcurrent and customers have the peace of mind that [their risk] iscovered,” said Mr. Shapiro.

Last year, the Hartford recognized the need for consolidatingits renewable energy practice under one roof, noted James Gardiner,assistant vice president and head of the company's renewable energypractice. The company is developing a national practice that willhave a full line of insurance offerings by the end of thisyear.

The focus, he said, will be to make sure thatagents and brokers will have the resources available to them thatthey need.

“Smart agents and brokers focuson what is driving their business, and we see major agents andbrokers building their environmental practice,” said Mr. Gardiner.“Where a few years ago going green was a social statement ormovement, now it is becoming part of any construction. We arecommitted to understanding the distinct needs of thisindustry.”

Chubb Minds the Gaps, While CNA Sees Opps in Upgrades

Chubb Group of Insurance Cos. has added endorsements to itsproperty coverage that fill in gaps in policy language that couldhave made it difficult to keep a building environmentallysustainable, according to Bill Puleo, a vice president.

Case in point: Imagine a building with a LEED-Silver rating. Ifthe building were built to replacement standards years later aftera loss, it might not achieve the same rating. The endorsementprovides the necessary upgrades to keep the rating. Anotherendorsement allows the property owner to upgrade further than theprior specifications.

Under the business-income provision of a commercial policy,Chubb also provides for additional downtime that is sometimesrequired for more green materials or equipment, said Mr. Puleo.These coverages apply to any size accounts.

Chubb views the potential for growth as endless, and JimAlbertson, clean technology segment leader, says the company wantsto be involved at the very beginning of a project and grow withthat account, providing for the client's insurance needs into thefuture. That also means helping the agent or broker from the pointof sale to fulfillment of the client's insurance solutions.

The coverage Chubb offers caninclude unique exposures: for example, the owner of a largewarehouse who allows a utility company to lease space on the rooffor solar panels. Risks could include structural integrity of thebuilding or proper access to the roof for fire protection.

Chicago-based CNA offers a replacement coverage program, too,said Bob Wenning, underwriting director. The company offers theupgrade to green-level material and energy efficiency under apolicy endorsement that is based on a percentage of the propertyinsurance premium.

As the economy improves, Mr. Wenning said he expects clientsboth in the government and the private sector to consider thesecoverages more often. Agents and brokers in the small- andmiddle-market area may see opportunities in property owners whopostponed green upgrades due to the economy but are now eager tocatch up.

A Range of Risks at ACE

Unlike other insurers, ACE offers its environmental coverage ona wholesale basis through ACE Westchester Environmental, as well ason a retail basis through ACE Environmental Risk.

Barbara Deas, president of ACE Westchester Environmental, saidon the wholesale side the company's practice focuses on small- andmiddle-market contractors and consultants.

The company provides coverage for a range of risks coveringbio-fuel facilities, solar-panel contractors and wind farms (bothactive and in research and development), geo-thermal systems,fuel-cell producers, and other environmental sectors.

In terms of the geographic reach of green, “In certain areasthis is a new idea catching on faster than others, mostly on theWest Coast,” said Ms. Deas. “The Southwest through the Northwestare the leaders. The less populated states, like Colorado, are moreprogressive than the East Coast. The South is now just comingaround.”