Environmental issues and green construction have a few points of intersection in the insurance marketplace. When it comes to risk exposure, green construction techniques—new types of building materials, natural roof coverings, or even indoor water features—have raised concerns about how those components might impact mold, air quality, and other potential environmental issues.
When it comes to coverage for green construction, several environmental insurers have made options and endorsements available to cover the cost of LEED-certified upgrades connected to cleanup and restoration.
“Four to five years ago, all anyone wanted to talk about was green. We used to get calls all the time about how to price green endorsements based on the cost to retrofit commercial properties. But in the past year and a half it’s been eerily quiet,” says Steve Brewer, senior vice president of underwriting solutions at MSB, which provides pricing data for green building as part of its property-valuation solution.
The reason carriers have quit calling with questions is not because there is less interest in sustainable building. “New buildings are being built to greener standards. We are seeing an increase in renovation to green,” says Norrine Brydon, vice president of data asset and research at Marshall & Smith/Boeckh (MSB), a provider of building-cost data to the property insurance, appraisal, tax assessment, real estate and lending sectors. “There are more federal, state, and local mandates that have taken effect, such as CALGreen [the California Green Building Standards Code of 2011].”
Rather, carriers have become more comfortable with offering and pricing for the coverage. “When regulations started coming into effect, carriers had a fear of the unknown,” says Brydon. “As insurers got their heads around the changes and as green building materials and construction techniques have become more common, they became a lot less concerned about it.”
“Carriers are definitely using green endorsements as a competitive factor. They’re getting smart about what ‘green’ means—what [construction] items are heavy financial impacts and what ones aren’t,” adds Brewer. “A few years ago, it was a hot fad that everyone wanted to learn about. Now, it’s just part of how construction upgrades are done.”