Date: Wed, 07 Jul 1999 09:44:52 -0700

(First of a series of notes detailing results of recent visits to
Lawrence Berkeley National Labs-LBNL)
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Insurance Loss Protection Through Sustainable Energy Technology

LBNL has begun a new and novel area of inquiry, exploring how energy relates to insurance-loss risks. The program is opening a number of fascinating new areas, and opening lines of communication between the insurance industry and the many different players in energy and environment.

Utilities have begun to initiate collaborations with insurance companies: there are many interesting and innovative opportunities for cross marketing and introduction of new types of customer services, product differentiation, and customer retention measures.

See Program website at http://eetd.lbl.gov/insurance

Contact: Project Leader: Evan Mills, 510-486-6784, emills@lbl.gov

Climate Change Risks
It is clear that weather-related natural disaster losses are becoming more and more severe, and possibly uninsurable. Global warming may or may not be responsible for global climate change, and greenhouse gases and energy consumption may or may not be major contributors to warming or climate change. Nevertheless, there is a growing view that something needs to be done, hastened by the growing scientific consensus about the linkages.

This article provides a good review of these ideas:
“The Coming Storm – Global Warming & Risk Management”
Risk Management magazine, May 1998, pages 20-27.
http://eande.lbl.gov/CBS/PUBS/comingstorm.html

The insurance industry – in Europe, particularly – is tackling the issue head-on, realizing that they have the most at risk and the most to lose. If energy impacts need to be reduced, then insurers have a stake and a role to play. A leading group of international insurers and reinsurers, led by companies in Europe and Asia, has joined together as the United Nations Environment Programme (UNEP) Insurance Industry Initiative on the Environment. (This kind of effort isn’t new. Historically, the industry has lead developments such as establishing fire departments and the Underwriter’s Laboratory.)
http://eetd.lbl.gov/CBS/insurance/UNEPinvite.html (more on UNEP)

Direct Risk/Loss Reduction — “No Regrets”
Even if you don’t believe in global warming, there are many untapped opportunities to reduce insured risks through the application of energy-efficient and renewable-energy technologies and services. The promotion of technologies and services for insurance loss reduction and loss prevention is as old as the fields of insurance and risk management, but this research is finding a whole new category of technology to be applied.

This approach provides a “no-regrets” opportunity for insurers, as the risk-reducing benefits offer distinct immediate value, irrespective of the timing or extent of damages related to global climate change.

Example–Halogen torchiere lamps consume a lot of energy, and pose a significant fire hazard. Replacing them with compact fluorescent torchieres reduces both. An insurance company and utility cofunded a program to do this in college dorms.
See: http://eetd.lbl.gov/cbs/EMills/arkwright.html

LBNL identified 78 technologies and techniques that can help reduce insurance losses and manage risks. See LBNL Report #41432, August, 1998
( http://eetd.lbl.gov/CBS/insurance/LBNL-41432.html )

The most common physical perils addressed were power failures, fire and wind damage, and home or workplace indoor air-quality hazards. These can potentially reduce insurance losses for many types of coverage — boiler and machinery, builder’s risk, business interruption, commercial property insurance, completed operations liability, comprehensive general liability, contractors liability, environmental liability, product liability, professional liability, service interruption, workers’ compensation, health/life insurance, and homeowners insurance.