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New risks for green buildings

Source: Middle East Insurance Review | Apr 2018

Green buildings using new materials, systems and technology present new risks, challenging insurers to respond with appropriate wordings and products, says Mr Ricardo Arroyo of AXA Insurance (Gulf).
 
 
The advancement in green technology is aiming to develop high-performance buildings with lower operating costs, lower environmental impact and higher asset value. This movement towards advanced technology contributes to the global effort of providing a better and more secure environment for the future.
 
   However, uncertainty related to life safety, environmental impact and fire protection is higher in green buildings than in conventional ones due to limited data, loss history and analytical studies. 
 
Risks from green buildings
There are three main risks for insurers that may arise from materials and systems used in green buildings. 
 
   First, the introduction of new construction materials such as thermal insulation systems with combustible components increases the fire load in a building and contributes to rapid fire spread. A fire involving combustible insulation material leads to a higher release of toxic fumes in the environment in addition to higher emission from a firefighting apparatus.
 
   Second, a renewal energy source such as the photovoltaic system, which is an important aspect of a green building, may introduce fire hazards. The electrically charged parts of the system can create sparks and start a fire. The installation and arrangement of the panels may assist in propagating a fire and increasing the spread. 
 
   Additionally, solar-power systems cannot be switched off in the event of a fire. The system will continue to generate electricity as long as the solar panels are exposed to a light source such as sunlight. This significantly increases the difficulty of a firefighting operation and the risk on firefighters.
 
   Third, while green roofs and walls are essential features in green buildings with benefits of capturing of rainwater for irrigation use, enhancing thermal insulation, and improving air quality, these roofs and walls may also introduce health and fire hazards such as mould growth and an increase in the combustible load of a building.
 
Other hazards in green buildings
In addition to these three main risks, the following have also been identified as hazards that may present a high risk when unmitigated within green buildings.
 
Materials & systems that increase the spread of flames
  • Structural integrated panels; 
  • Exterior insulation and paint finishes; 
  • Rigid and spray applied foam insulation;
  • Interior materials and finishes; and
  • Vegetative roof and sidewall covering systems.
 
Ignition sources and combustibles
  • Solar roof panels, shades and awnings; 
  • Alternative energy systems (hydrogen fuel cells, battery storage systems, EV charging systems); and 
  • Use of wood and other biopolymers.
 
A storage of waste which adds to fire load 
  • Provision of recycling stations in buildings.
 
Obstacles to firefighting operations 
  • Use of permeable concrete/asphalt systems.
 
Increases the spread of flame/smoke 
  • Use of natural ventilation in the HVAC systems.
 
Risks with developing green buildings in the Gulf
Furthermore, the following have been identified as risks when attempting to develop green buildings in the Gulf region:
 
Construction risks
  • Lack of operational standards: Different countries, eg, Qatar, the UAE, Lebanon, have different rating systems for their own green building rating systems;
  • Mandatory requirements to achieve certain levels of green certification, eg, Qatar, the UAE;
  • Design responsibility;
  • Longevity and warranty of new products;
  • Untested materials (risks of long-term use); and
  • Delays in project due to unavailability of product, change in regulations, etc.
 
Property risks
  • Cost of recertification;
  • Cost of reconstruction as technology in place may have become obsolete;
  • Extra expense in purchasing power from the grid when the power-generation system is down;
  • Extra coverage is needed compared to conventional counterparts as green buildings usually have vegetative roofs, water collection systems, water and waste processing/recycling systems; and 
  • Environmental pollution from debris after firefighting which may need to be sent for recycling which may be costlier.
 
Business interruptions
  • Certain clients are now generating their own power and providing electrical energy back to the grid; and
  • Reconstruction might take longer than conventional buildings.
 
Opportunities with shifting to green technology
Despite these risks, there are some opportunities insurers can take advantage of with the introduction of green technology in the region. 
 
   One such opportunity for owners is using green energy in buildings to increase the loss-prevention measures by using new technologies to detect and mitigate the risk of fire or flood. 
In this regard, insurers are starting to introduce clauses in products such as replacement cost coverage for equipment with more efficient equivalents; equipment currently in operation, under construction or newly purchased can be added to the policy. 
 
  Green roofs are an example of what would be covered under these new clauses.
 
   Although it comes with its own set of challenges, risks and hazards for both owners and insurers, developing high-performance green buildings should lower costs, reduce the environmental footprint and yield higher value in the long run. 
 
   This shift to green technology contributes to a more secure environment for the future, while also providing opportunities that smart insurers in the region can take advantage of. M 
 
Mr Ricardo Arroyo is Chief Commercial Property & Casualty Officer, AXA Insurance (Gulf).
 
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