OGCA 4th Annual Construction Symposium

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OGCA 4th Annual Construction Symposium

• LEED GREEN
• April 2007

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St. Gabriels Parish Fenns First LEED
Registered Project

• Invited to participate in several development
  committee meetings.
• Allowed to contribute risk and insurance advice
  and suggestions throughout.
• Very positive working together environment.
• New Building standard Builders Risk and Wrap
  Up Liability Insurance. No innovations.
• A great example that not all projects have to be
  large to be LEED registered.
• A positive experience to witness the co-operation
  level between all parties.

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LEED/Energy Reduction

• In a report from August 2005 over 200 projects in
  Canada were LEED Registered. In 2007 over 450
  Projects are LEED Registered. 60 are presently
  shown as LEED certified.
• In the United States in 2007 more than 3200
  buildings earned Energy Star rating for powerful
  cuts to energy bills/greenhouse gas emissions.
• 575MM sq feet now save US600MM annually in lower
  energy bills. The equivalent of 11 Billion
  pounds of greenhouse gas emissions in turn
  equivalent to emissions from almost 900,000
  vehicles.

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LEED/Energy Reduction

• The 2006 beneficiaries of the Energy Star (US)
  rating included 320 supermarkets, 320 office
  buildings, 200 K12 Schools, almost 90 banks,
  courthouses, financial centres, hospitals, hotels
  etc.
• There are obvious environmental and energy
  savings advantages to sustainable design and
  construction and evidently financial benefits
  too.
• The Insurance industry is one of the largest real
  estate owners in the world.
• What then is the Insurance Industrys role in
  LEED/Energy reduction?

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Energy Efficient and Renewable Energy
Products/Services Risk Management Advantages

• Efficient refrigeration maintain required
  temperatures longer in absence of power reduces
  perishable goods loss exposure
• Energy efficient windows lower breakage from
  fire reduces spread resistant to thieves,
  windstorms.
• Insulated water pipes an insurance loss leader
  - retrofit saves energy and reduces freeze
  damage.
• Duct Sealing reduces pressure imbalances less
  fire/carbon monoxide/radon gas exposure. Reduces
  Ice Dam formation on roofs.
• Urban Heat Island Migration Lowering urban
  temperature using solar reflectant roofs and
  roads and tree planting lowers air conditioning
  costs. Lowers heatwave death toll also.
• Electric to Gas Cooking - 1 cause of house fires
  in Canada per Alberta Fire Commissioner 65-75
  of kitchen fires due to cooking oil. 4 times more
  common in homes with electrical vs. gas stoves.
  Gas is almost twice as energy efficient as
  electricity.

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Energy Efficient and Renewable Energy
Products/Services Risk Management Advantages

• Building Commissioning improper work
  performance leads to litigation, business
  interruption and contractor callbacks.
• Through commissioning, quality control increases
  during design, construct and start up. Ensures
  all systems function as they should reduces
  plumbing, heating, electrical loss expectancy.
• Commissioning is perhaps the most important risk
  management measure used to attract the attention
  of Insurers to embrace Green/LEED.
• Insufficient Insurers are using Commissioning to
  support risk acceptability/lower rates, yet it
  should convert to lower risk of loss.

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Proven Perils Reduction through use of Energy
Efficient Renewable Energy Technology

• Extreme temperatures reduced
• Fire Wind Damage reduced
• Home/Workplace Indoor Air Quality Hazards/Safety
  Hazards reduced
• Ice and Water Damage reduced
• Outdoor Pollution/Environmental hazard reduction
• Power failures reduced
• Theft Burglary Damage reduced
• INSURERS RISK OF LOSS REDUCED??

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Proven Positive Impact to Insurance through use
of Energy Efficient Renewable Energy Technology

• Boiler Machinery
• Builders Risk
• Business Interruption Insurance.
• Commercial Property
• General Liability incl. Completed Operations,
  Products Liability, Contractors Liability.
• Health Life Insurance
• Professional Liability
• Service Interruption
• Workers Compensation.

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Current Insurance Industry Involvement Energy
Efficient Renewable Energy Technology

• Public education e.g. distributes risk
  management information, energy savings advice.
• Financial Incentives e.g. public energy
  efficient premium discounts professional
  liability courses attendance discounts.
• Specialty products e.g. Energy Savings
  Insurance, Naturesave, inspection based indoor
  air quality products.
• Investment insurers involved in venture capital
  funds for sustainable/energy efficient
  developments.
• Inspections advice e.g. Building inspections
  including advice on energy efficiency/indoor air
  quality infrared thermography for problem
  detection.

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Current Insurance Industry Involvement Energy
Efficient Renewable Energy Technology

• Codes, standards e.g. Canadian Institute for
  Catastrophic Loss Reduction endorses improved
  enforcement of building energy codes. More
  Insurer involvement required.
• Research Development e.g. FM Research
  Corporation and UL yet to step significantly into
  energy technology. Significant efforts in roofing
  Public Private research especially how energy
  efficient roofing may enhance roof structural
  integrity in wind. US and Canada.
• Own energy management e.g. Insurers own
  significant real estate worldwide. Many have in
  house energy management programmes. Can lead by
  example.
• Carbon Insurance - covers Kyoto-related risk in
  connection with carbon credit purchases.

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Insurance Industry ChallengesEnergy Efficient
Renewable Energy Technology

• Benchmarks evidence of risk reduction benefits
  lacking.
• Insurer involvement in Green/LEED technology and
  RD is limited learning curve.
• Potential downside of improper use of Green/LEED
  technology.
• Insurer appetite, or lack thereof and class
  underwriting not all will take interest due to
  specialties.
• Building Regulatory issues.
• Inappropriate Customer perception deep pocket.
  Failure to understand purpose of insurance.

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Insurance Industry ChallengesEnergy Efficient
Renewable Energy Technology

• Insufficient point of sale involvement,
  existing personal and commercial product
  improvements needed especially basis of
  valuation.
• Potential enhanced Professional Liability
  exposure to design team caution required in
  promoting Green/LEED to owners. May attract
  professional liability claims.
• Contractor failure to perform surety exposure.
  
• Close control of change orders to avoid
  deviating from LEED goals.
• Is there a professional liability exposure now by
  NOT building LEED?
• Insufficient insurers involved with Canada Green
  Buildings Council.

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Conclusion

• The Insurance industry is involved in a large way
  in Green Buildings/LEED and in related specialty
  products.
• Only one insurer, Firemans Fund (USA) is known
  to have a discounted suite of products
  specifically designed for LEED certified
  buildings allowing to rebuild AND replace with
  green alternatives.
• More insurers need to revisit existing policy
  wording and revamp to align with green
  certification processes. Joining Canada Green
  Building Council and other organizations will
  help.
• Owners of existing standard buildings, new
  standard buildings and new LEED buildings all
  need a broader range of extensions to move with
  and respond to the changing construction industry
  as Green/LEED evolves.
• Insurance rebuilds billions of dollars a year.
  It also owns a significant worldwide of real
  estate holdings. In doing so it should also play
  its part more aggressively in supporting global
  initiatives that contribute to the environment in
  a more positive way.

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References

• Numerous materials were sourced to develop this
  brief presentation
• The Canada Green Building Council
  http//www.cagbc.org/index.php
• The Insurance Journal October 16, 2006
  Firemans Fund Introduces Green Building Coverage
• ENERGY POLICY, Risk transfer via energy savings
  insurance Evan Mills Jan 25, 2002 Elsevier
  Science Ltd.
• ENERGY POLICY, The Insurance and risk management
  industries new players in the delivery of energy
  efficient and renewable energy products and
  services Evan Mills - 2003
• North Bay Business Journal Nov 20, 2006
  Insurance products for Green Buildings Takes off
  Kindler, Dorsey
• Firemans Fund Insurance Company Stephen
  Bushnell, Product Director Commercial Business
  Real Estate Innovation.
• Pro Demnity Insurance Company February 2006
  Sustainable Design /LEED from an Insurers Risk
  Management Perspective John Hackett, OAA, FRAIC
• Business and Management December 2005 - Green
  Design Can Cause Red Ink - Frank Musica
• Daily Commercial News Various articles.
• The Globe Mail Various articles.
• The Toronto Star Various articles.
• Royal SunAlliance Insurance Company of Canada
  Dan Johns
• Olga Gil Research
• No references should have been omitted but if I
  have it was unintentional and my apologies are
  extended.

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Contact Information

• Simon J. Fenn, CIP
• President
• Fenn Fenn Insurance Practice Inc.
• 905 836 6066
• simon_at_fenninsurance.com
• www.fenninsurance.com