OGCA 4 th 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