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Green Risk - Insurance Drops for High-Performance Buildings

June 17, 2015



The actuaries have it right.


Not only are green buildings healthier, productivity lifters, and worth more money in capital markets - now the insurance industry confirms that they’re better insurance risks.   

And one casualty insurer is offering hefty discounts for green-certified properties.


“The greener the buildings are, the bigger a premium credit we offer.  There’s a direct correlation between quality of risk and green-building practices” says Eric Arthur, executive vice president and co-founder of Fulcrum Insurance Programs outside Seattle.


“The type of manager who’s spending time to green policies and procedures is doing a better job of watching the shop.” 


Fulcrum offers discounted casualty insurance premiums of up to 15 percent for green-labeled buildings like LEED and ENERGY STAR. And the higher the certification level (like LEED platinum), the more Fulcrum can drop rates. Fulcrum can also weigh othergreen programs like municipal ones that don’t have national recognition.


“We believe it because it’s logical. If you’re the type of manager who’s doing this stuff, it translates into fewer and smaller claims.”


Arthur started Washington-based Fulcrum in 2008, and he insures condos, mixed-use, retail, apartments, hotels and warehouses.  Though he doesn’t release figures for the privately held Fulcrum, he says his business has grown exponentially since, and his on-line client map shows a tenfold increase since 2010.  While Arthur says analysts like to have at least 10 years’ worth of data to declare a bona fide trend, Fulcrum’s approach makes good business sense.


One good example is lighting choice - high- versus low-efficiency.  Not only do lighting retrofits save building owners and tenants money on utility bills (a real estate concern that feeds cap(italization) rates), they can reduce fire risk.


“New CFLs run at 75 percent cooler temperatures than incandescent bulbs, and thousands of light bulbs create fires annually,” he says.  “By reducing the chance of fires, you reduce the chance of buildings burning down and people getting hurt.”


Japan’s largest insurer, Tokio Marine & Nichido Insurance Company, engaged in a project that not only polished its green credentials.  It also helped reduce risk for some of its insureds.  


Tokio Marine has planted 20,265 of mangrove trees across seven countries since 1999.  The trees serve as a carbon sink to help Tokio Marine meet its goal of carbon neutrality.  And they've help mitigate storm damage to coastlines, thus reducing insurance claims.


Arthur says his polestar is work by Prof. Evan Mills at Lawrence Berkeley National Laboratory, a staff scientist there who focuses on economic implications of climate change.  Mills pegs weather catastrophes averaging $50 billion a year, and he says they've doubled (and then some) since the 1980s.


“Increasingly, multifaceted weather- and climate-related insurance losses involve property damage, business disruptions, health impacts, and legal claims against polluters,” Mills says.


Linking high-performance green buildings, he says, “Insurers must also adjust to risks emerging from society’s responses to climate change, including how structures are built and ​energy is produced.” 

Arthur started Fulcrum because he cares about the planet's future.  And he realizes he must make a solid business case to persuade building owners to step up the way they operate their buildings.


“At the end of the day, it’s not really about climate change,” says Arthur.  “It’s about dollars and cents.”


PHOTOS:  Green umbrella, courtesy Dmitry Zimin.  Eric Arthur, self.  

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