Green Spotlight on Green Insurance

Cornerstone speaks with Steve Bushnell

Q:  Is Fireman’s Fund the sole provider of insurance coverages for green properties?  What designates a “green” building for insurance purposes?

A:  Fireman’s Fund is the first and only insurance company to offer a set of coverages specifically designed for green buildings, and we are unaware of any other companies even considering similar offerings.  Our coverages are available nationwide and are only for commercial and multi-family residential properties.  We are, however, developing similar coverages for single-family residential properties that will be available later this year.

A “green” building is one that has been certified as such by the U.S. Green Building Council (USGBC) through one of its LEED rating systems.

Q:  What factors drove Fireman’s decision to enter this market?  Why was such coverage viewed as necessary?

A:  Fireman’s Fund is committed to developing a deep understanding of the industries we insure (such as real estate, hospitality, restaurants, etc).  We spend a considerable amount of time researching the fundamentals of each one, including what factors contribute to the success of a business, industry-related risks faced by our insureds, and industry trends.  Through this deep knowledge, we develop differentiated coverage offerings that add real value to our insureds.  Over the last few years we began to see green (energy- and water-efficient, healthy and environmentally friendly) buildings as an emerging trend.  We devoted significant resources to develop an understanding of these buildings, the economic and environmental value proposition they offer, and the special risks green building owners must consider. Fireman’s Fund became convinced that green buildings represent a real trend that is beginning to move into the mainstream.  They have the potential to render traditional buildings obsolete in the near future.

Q:  What types of green insurances presently exist?

A:  Fireman’s Fund offers three coverages that relate to green buildings:

  1. Certified Green Building form with coverage designed to meet the needs of green building owners, which includes full coverage for vegetated roofs, alternative power and energy systems, coverage to recycle debris following a loss, etc.  This form includes a rate credit recognizing the superior features of green buildings.
  2. Green Upgrade form for “traditional” buildings that offers the replacement of certain building components (roofing, lighting and plumbing systems), interior finish materials (paint, carpeting) and   personal property items (electronic equipment, furniture and fixtures) after a loss with “green” alternatives.  If the building suffers a total loss, we will pay to rebuild as a certified building, including coverage to hire a certified LEED professional and all costs and fees necessary to become certified.  This form also has some elements of the Green Building form in the event that the building has alternative power or water systems.  We will also pay to recycle debris following a loss.
  3. Building Commissioning form for any green or traditional building.  Following a loss (that exceeds $10,000), we will pay to hire a professional engineer to commission the system that sustained the loss.  We will also pay for the engineer to perform a test and balance on the HVAC (even if it was not involved in the loss). Commissioning means the systems will be energy-efficient, properly installed and safer.

No other insurance company offers these coverages; if they insure a green building, it is on the same terms they use for a traditional building and will not address the special features of green buildings.  If they insure a traditional building, they will repair damage after a loss with the same materials that were in the building before the loss, not green.  No other insurer pays for the insured to hire an engineer to conduct commissioning following a loss.

Q:  What do you think is the short- and long-term future of this market?

A:  We believe the future is green and that Fireman’s Fund is well positioned to respond to its customers’ green-related needs. Our claim adjusters have received extensive training in green buildings and are able to quickly respond to damages without degrading the greenness of the structure.  Also, our loss control staff is presently developing a set of Green Risk Management best practices designed to help traditional building owners implement green operational procedures.

Green buildings present a profound value proposition:  reduced energy costs and water consumption; increased tenant demand, net operating income and asset value; improved occupant health and productivity; and increased retail sales.  Combined with environmental benefits, this economic value will result in more and more new green building projects. Additionally, with the advent of LEED-EB (Existing Buildings) to provide an excellent road map, we believe that the upgrade of existing buildings to green will outpace new green construction.

Stephen G. Bushnell, CPCU, ARM, is a product director at Fireman’s Fund Insurance Company (www.firemansfund.com) in Novato, California, responsible for development of innovative new products, services and information for commercial real estate customers.  He joined Fireman’s Fund in 2004 with more than 30 years of insurance industry experience, having held underwriting, marketing and management positions in a number of companies.  Steve recently contributed to the Ceres report, “From Risk to Opportunity: How Insurers Can Proactively and Profitably Manage Climate Change,” which gained national media attention.  He is quoted often in industry trade publications and is a frequent conference speaker.

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