Insurance catching up to green building coverage needs

Where does Canada place in world LEED rankings?

Insurance catching up to green building coverage needs

Commercial Solutions

By Desmond Devoy

This article was produced in partnership with Sovereign Insurance.

Desmond Devoy, of Insurance Business Canada, sat down with John McBride, underwriting specialist, with Sovereign Insurance, to discuss the future of green buildings in Canada, and how they can best be insured.

What do Canada’s green changes mean for how the insurance industry covers new, environmentally sound developments, and retrofits of older properties?

The changes are coming, and the need for them in Canada’s buildings is real. But surprising as it may seem, buildings have more of an environmental impact than you may think.

In Canada, buildings rank as the third largest contributor of greenhouse gas emissions, behind oil and gas and transportation, according to the C.D. Howe Institute .

This is, in part, because of our northern environment, with temperature extremes necessitating more energy to heat indoors, especially in the winter months.

Another contributor is that 50% of Canada’s buildings, both commercial and residential, were built before 1980. As such, “I think the green initiative is really going to focus on more retrofits to address this,” predicted John McBride (pictured), an underwriting specialist with Sovereign Insurance, based in Winnipeg. And any future construction will have to be more environmentally conscious than what was built before 1980.

McBride pointed out that the government of Canada has already committed to net-zero emissions by 2050, with energy efficiency playing a significant role, which will have an impact on future builds.

But what constitutes a green building?

McBride uses the definition of the United States Environmental Protection Agency to set out what a green building is: “the practice of creating structures and using processes that are environmentally responsible and resource-efficient throughout a building’s life cycle, from setting to design, construction, operation, maintenance, renovation and deconstruction.”

And there are different ways that a building can be categorized as green and sustainable. There are several green building authorities that are recognized in Canada who lead the way in green building standards and regulations. These include LEED (Leadership in Energy and Environmental Design), Green Building Initiative (Green Globes), and Energy Star, to name a few.

“For buildings, LEED is right at the top,” said McBride.

The initiative has been catching on with Canadian builders, so much so that by 2022, Canada ranked as third in the world for LEED certified buildings.

“We are doing well compared to much of the rest of the globe for green certified buildings,” McBride said. He added that not only do green buildings consider environmental impacts and save on energy costs, but their design enhancements, such as increased natural lighting, can be beneficial to the psychological and physiological well-being of occupants.

A healthier planet, through better buildings

Green building standards can include, but are not limited to, energy improvements around:

  • Insultation
  • Water
  • Lighting
  • Power
  • Heating
  • Cooling

All of this comes with an eye fixed on lower and more efficient energy usage. Common modifications can include:

  • Low-flow faucets and toilets
  • LED lighting
  • Low heat transfer windows
  • Replacement of older insulation with new, higher R-value insulation
  • Using recycled and sustainable materials during construction
  • Low VOC paints and adhesives
  • Using geothermal or solar panel power
  • Green roofing
  • Sustainable landscaping

When it comes to retrofits, McBride noted that even institutions, like Winnipeg’s Millennium Library, have green roofs, while buildings in warmer climates have utilized solar panels on their roofing structures.”

One impediment to going green is that upfront costs can be greater than more traditional materials – “but the long-term savings from energy consumption can balance this out,” said McBride.

He pointed out that federal and provincial governments are offering grants, rebates, tax credits, and utility bill credits from net metering, which allows businesses to feed any excess electricity generated from renewable sources back into the grid.

Because of the non-traditional designed and specialized materials used for green buildings, the insurance-to-value calculations often require appraisers who are experts in this field. These appraisals take into account any specialized technology and/or sustainable technology used.

Sovereign’s new environmental upgrade enhancement

So what is Sovereign doing to help address the need for more green builds and retrofits?

The company incorporated an “Environmental Upgrade” enhancement in its standard property wording this past September. The enhancement is used to address modifications required to repair or replace damaged property in the event of a loss to green building standards. It also includes coverage for additional costs that may be associated with the involvement of green authorities during the repair process, and any additional costs associated with green certification or recertification. This property enhancement comes at no additional cost to the insured.

“You want to make sure that the insurance limits you have are adequate for anything specialized in that building,” McBride said.

A green building will also have to take into account the unique designs and materials used to make it.

“Sovereign has recognized the impact of these green initiatives on the environment,” he said.

To find out more about Sovereign Insurance visit them online at

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