OGCA 4th Annual Construction Symposium

1. OGCA 4th Annual Construction Symposium LEED GREEN April 2007

2. St. Gabriel’s Parish Fenn’s 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 Builder’s 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.

3. 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 US$600MM 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.

4. 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 Industry’s role in LEED/Energy reduction?

5. 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.

6. 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.

7. 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??

8. Proven Positive Impact to Insurance  through use of Energy Efficient & Renewable Energy Technology Boiler & Machinery Builder’s Risk Business Interruption Insurance. Commercial Property General Liability incl. Completed Operations, Products Liability, Contractor’s Liability. Health & Life Insurance Professional Liability Service Interruption Workers’ Compensation.

9. 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.

10. 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.

11. Insurance Industry ChallengesEnergy Efficient & Renewable Energy Technology Benchmarks – evidence of risk reduction benefits lacking. Insurer involvement in Green/LEED technology and R&D 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.

12. 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.

13. Conclusion The Insurance industry is involved in a large way in Green Buildings/LEED and in related specialty products. Only one insurer, Fireman’s 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.

14. 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 – Fireman’s 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 Fireman’s Fund Insurance Company – Stephen Bushnell, Product Director Commercial Business Real Estate Innovation. Pro Demnity Insurance Company – February 2006 – Sustainable Design /LEED from an Insurer’s 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.

15. Contact Information Simon J. Fenn, CIP President Fenn & Fenn Insurance Practice Inc. 905 836 6066 simon@fenninsurance.com www.fenninsurance.com