A new frontier: Insuring green risks

The "green revolution" has brought about many changes to the building industry and to other related industries including the insurance sector. Change is accompanied by questions which abound in the insurance sector as it moves to keep pace with the green movements in the building arena. Green risks are here now and building owners, property managers, risk managers, and the restoration industry are looking to the insurance industry to offer market solutions and answers to the very special characteristics of these green risks. Some early questions are: which companies are going to underwrite these risks? What coverage will be available? What are the unknowns with insuring green risks? Will new types of claims result from these exposures? Will insurance professionals need formal training for green risks? The industry and insurers will need time and experience to accurately rate these policies. Will total claim expenses be lower on these risks than non-green ones? Will premiums be lower on green risks compared to non-green risks? Will green buildings and homes harm non-green building and home values by making them obsolete? What issues will be tested in court over green coverage? The level of green involvement by the insurance industry, so far, varies greatly. Some are doing nothing to address this emerging market. Others are in the early stages of researching and developing green insurance products to offer their clients, while leaders are already selling policies or endorsements created to specifically insure the materials, methods, and processes featured in green risks. Claims too will be complicated. For the claims professional assigned a loss on a green risk, is there a green policy in effect? What special provisions does it offer? Are limits adequate to rebuild a green risk in the event of a large catastrophic loss? What special expenses will the insurance policy in force cover? Will commissioning or re-commissioning expenses be covered? Will the policy cover re-certification costs on green risks? Will the policy cover added delays to rebuilding due to the re-certification process? Will qualified restoration contractors in green buildings and green programs be available? Decisions such as to lay green label carpeting, install recycled content materials, use only low or no VOC building materials, or install an Energy Star roof system will concern the claims person eventually. The implementation of high efficiency appliances, plumbing, lighting, and electrical systems will affect us too. Claims adjusters will be exposed to cutting edge renewable and energy saving systems using solar, wind, and water. Green building programs are also "climate-specific" and tailored for conditions in particular regions. What may be a common green practice in the northeast U.S may not be a good practice in the southwest U.S. Following this logic, claims professionals should be familiar with the green measures and programs in their market/region. The knowledge a claims adjuster in New York obtains over time may vary from the knowledge a claims adjuster in San Diego receives. While the fundamentals of many green building programs are similar, the methods to achieve common goals in these are not. What will the new green insurance frontier look like as it evolves and these questions are answered? As of now, it is still too early to tell. In the future watch as Travelers, CHUBB, and Farmers insurance companies are joined by others outlining what will be the new norm in the new day of green insurance. For as long as the industry can offer consistent reasonable coverage for green risks at reasonable premiums, green insurance will most certainly grow to its full and imagined potential. Eric Martin is the owner of Advanced Restoration, West Babylon, N.Y.