Aug. 22, 2008 - Many commercial property and casualty insurers are dragging their heels in offering special coverages or program enhancements for green building construction, according to a new survey from Marsh Inc., an insurance broker and risk advisory firm.

The reason insurance companies are opting to stay on the sidelines? Many are still figuring out the extent and types of risks these new building projects might present.

"By and large, insurance companies are carefully monitoring the progress of green construction, the evolution of the contracts that define roles and allocate risks on these projects, and the reliability and durability of green materials and systems," says Catha Pavloff, a senior vice president in Marsh's Construction Practice.

The report describes how insurers are responding to the green building trends. Some key findings:

Taking the LEED

Insurers are keeping a close eye on developments in U.S. Green Building Council's LEED certification program to determine whether the certification may be an effective risk differentiator for architects and engineers involved in green projects.

Perceived Barriers

Property insurers have been the first to offer special coverages for green and LEED certified buildings. Casualty underwriters tend to have the most significant concerns about green building exposures, with most viewing such projects as potentially more risky than traditional construction. (In particular, underwriters are leery of risks related to project delays because of extra time that may be associated with procuring special equipment, the time and the cost associated with flushing out a reconstructed space with fresh air, and adding new filtration media to conform to LEED standards.)

Getting a Fair Shake

While professional liability insurers have yet to develop new insurance policies or coverage enhancements, many currently provide clients with related risk-management advice. Marsh advises businesses seeking insurance for green facilities to first determine proper values to avoid being underinsured, or being charged too much premium.

The report, The Green Built Environment in the United States: The State of the Insurance Marketplace, is available free via online request.