Green premium: insurance discounts for green build
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 other green programs like off-the-radar municipal ones that don’t have national recognition.
|Significant insurance discounts for green-labeled buildings impacts net operating expenses (and thus, cap(italization) rates).|
“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 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 see 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. 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.
Many green retrofits reduce insurance risks and premiums.
“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.” (Read – “insurance claims”)
Not only has Fulcrum added member locations and insured square footage since 2008, it also spawned an allied trade group called AGPOM– the Association of Green Property Owners & Managers. (Think BOMA, only green.)
|photo by Dmitry Zimin|
AGPOM helps owners and managers of small to mid-size properties wade into the shallow end of the green-building swimming pool with simpler menu-based programming – some specifically green and some not. Implementing these programs in buildings can reduce insurance rates. AGPOM also focuses on occupant behavior, which can significantly drive energy use down (or up).
“When building owners and managers join, start to tackle AGPOM initiatives and work through the platform, they get rewarded with discounts on insurance,” Arthur says.
Arthur is a true believer in averting climate change through the built environment. Yet he realizes he must make a solid business case to make a significant difference, and he set up Fulcrum to incentivize better buildings and occupant behavior.
“At the end of the day, it’s not really about climate change,” says Arthur. “It’s about dollars and cents.”