Canadian Underwriter

Energy-efficient building materials pose underwriting challenges

August 12, 2022   by Philip Porado

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Insurers of large-scale commercial and residential construction projects are facing emerging complexity tied to the use of advanced building methods and materials designed to improve energy efficiency.

All levels of government are encouraging improved energy efficiencies for new structures and setting both short-term incentives and long-term minimum requirements, noted Steve Schmelzle, practice leader of construction and contracting at Intact Insurance Specialty Solutions.

That’s causing developers to adopt new building materials and techniques that meet or exceed those governments’ expectations.

“We’re seeing a need to closely review building materials such as insulated concrete forms, insulated metal panels, exterior insulation finishing systems (EIFS), and the [various] engineered forms of mass timber,” he told Canadian Underwriter.

“Insulation generally creates challenges around combustibility. Insurers, through risk engineering and careful underwriting, look to find solutions around these types of materials,” Schmelzle added.

The alternative, he noted, would be to say, “sorry they’re combustible, we’re not interested,” which is generally not a position insurers want to take.

“The engineering reviews will look at the specific products [and] look for FM rating [an advanced testing and certification standard that includes fire ratings] and for strength ratings, which then allow us to set our capacity, pricing, deductibles, warranties, etc.,” he added.

Construction’s seen a lot of change in a short period of time. Schmelzle said when he started in the construction specialty area 10 years ago, a concrete building was a concrete building and steel building was a steel building.

“Today, every type of building material is being advanced, and it’s all to have better energy efficiency,” he said.

“Along with [materials-driven] energy conservation, what we’re seeing is introduction of new energy production forms. That can be something as simple as solar panels on a roof, but also as advanced as a geothermal system [which provides both winter heating and summer cooling].”

While advancements always come with challenges, Schmelzle said in the end, it’s just a new form of equipment; insurers know how to insure boilers, and they have track records with cooling towers.

“Geothermal isn’t new technology by any means,” he said. “But having more buildings installing them is a new arena, a new challenge, or new opportunity to provide insurance solutions.”


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