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Green Insurance: Number of Climate Change-Related Products Doubles in 2007

Ceres is a non-profit coalition of investors, environmental groups, and other public interest organizations that works with companies as they negotiate the issues implicated by sustainability and climate change. Last week, it released From Risk to Opportunity: 2007, Insurer Responses to Climate Change, a comprehensive overview of presently available climate change-related insurance products. The report identifies 422 products from 190 different insurers, reinsurers, brokers, and insurance organizations in 26 different countries- more than double the number that the same Ceres-commissioned report counted a year ago.

With respect to insurance for green buildings, in addition to the Fireman’s Fund packages (which we’ve presented here previously), the report also notes coverage options from several other carriers. For example, Sompo Japan Insurance will cover the additional cost of installing various green design features, including green roofs and recycled materials- following a loss, while Travelers and Lloyds TSB offer policies that will upgrade conventional mechanical equipment to more energy efficient models. The Lexington Insurance Company’s Upgrade to Green package will offer the first green coverage for residential properties. The endorsement will cover the cost of upgrading homes with certain green products and materials in the event of a paid loss. Lexington will also offer Upgrade to Green for commercial properties, where covered losses will allow insureds to rebuild non-LEED-certified properties to a LEED Silver level, or LEED-certified properties to to a higher LEED level.

As we predicted almost a year ago, and as the Ceres report expressly acknowledges, insurers are seeing- and seizing- the opportunity that climate change-related issues are providing. With respect to the real estate industry, the proliferation of green design principles and building technology, as well as the dissemination of rating systems like LEED and Green Globes, is giving insurers a similar ability to create and sell new types of coverage. As the number of green insurance products continues to rapidly rise, (192 to 422 in the past year alone) industry stakeholders must monitor the evolving, climate change-driven insurance landscape to determine the propriety of purchasing green endorsements from an increasing number of available products.

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