Research from Verdantix, an independent analytical and research firm that focuses on climate change, sustainable business, and energy efficiency, forecasts that U.S. green building growth of 11% in 2010 will increase to 16% in 2011 and 24% in 2012. When compared with overall projected U.S. economic growth of between 1% and 2.5%, this growth rate is quite significant.
Visit their website at www.verdantix.com for more information.

*In this graph “sustainable building premium” is the incremental spending to achieve a LEED (Leadership in Energy and Economic Development) certification on new buildings covering water, energy atmosphere, materials and resources.

Buildings owners are becoming increasingly aware of a variety of energy efficiencies in green buildings. They are also discovering additional benefits because employees and tenants enjoy environments that include green aspects. Tenants are willing to pay more and employees tend to be more productive.

As building owners become more aware of the benefits of green construction, they will expect their insurance providers to help them address the exposures created by green materials and technology. Their primary concern is how their coverage will respond if their green building is damaged. A secondary concern is how their insurance provider will work with them to upgrade their non-green building to a green one following a loss.

Here is a possible loss scenario:

A windstorm at Happy Acres Nursing Home destroys the building's roof and its outside mechanical units. It was originally built in 2000. Energy costs and water usage are major concerns for Happy Acres. It had been reviewing potential changes in its building to achieve savings and believes that this loss will provide that opportunity. In addition, recent building code changes require some sustainability enhancements whenever a building permit is issued.

Happy Acres wants its insurance company to replace the roof with a green garden roof and the HVAC system with one that uses a geothermal heat pump.

According to Michael Kravitz, president of Insurance Innovators, Inc., “Almost any company that writes property coverage will entertain green building risks.” Insurance Innovators arranges coverage for green contractors, manufacturers and distributors of green products, and owners of green buildings.

Neal Schmidt, vice president of underwriting at Philadelphia Insurance Companies, says, “We will write property coverage for green exposures on our full portfolio of products, which is driven by nonprofit and human services organizations along with some 60 other product lines.”

“It costs green to go green, and in this economy not many businesses have the green,” according to Edward Martindale, senior account executive at S. H. Smith & Co. He continues, “I think green building will eventually become a standard that companies use to choose vendors, contractors and others with which they do business. That being said, thus far we have seen very little in the way of green risks.”

Dusty Rowland, president and CEO of Mainstay Insurance Group, places green building risks with Chartis, Commonwealth, Lexington, Liberty International Underwriters and Zurich. Mainstay Insurance Group is the sponsored agent for the Association of Green Property Owners and Managers (AGPOM).

According to our experts, coverage is available in both the admitted and nonadmitted markets. Mr. Kravitz says, “Some of our companies are both admitted and nonadmitted and we may need to use nonadmitted paper to manuscript coverage that can't be done on admitted forms. The reason for us going nonadmitted would predominantly be if we could not meet the needs of the client within the ISO policy forms.”

Mr. Rowland’s program targets existing buildings in three industry groups: habitational, general real estate, and hospitality. He explains, “What is interesting about our program is that we grant credits for our target risks because we see them as having less exposure than traditional buildings. We have consistently seen management of green buildings as more experienced, sophisticated, and vested in their assets than their ‘brown’ peers, and that ultimately drives better loss experience.”

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