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Green building developments in SA could impact insurance premiums

29 September 2011 Lion of Africa Insurance

Green Buildings are a relatively new environmental concept. As such, the risks from an insurance point of view remain somewhat undefined – however, insurers and intermediaries are urged to familiarize themselves with the industry and the potential risks associated with this new dimension in the South African Construction Industry.

This is according to George Jennings, Senior Engineering Manager: Underwriting at Lion of Africa Insurance, who says Green building, also known as ‘Green Construction’ or ‘Sustainable Building’- as with many new developments, has a number of pro’s and con’s that should be kept top of mind when it comes to analysing the insurance implications.

“The onset of the Green Building revolution will also mean that new products and building materials will be developed and designed in order to be eco-friendly as well as aesthetically acceptable. While it is clear that the Green Building concept will have drastic and positive influences on the environment, it is also likely to have far-reaching effects on the short-term Insurance industry,” says Jennings.

Jennings explains that as the building process adapts for sustainable projects, the risks associated during construction and post construction will be put to the test. There are also the health and safety issues relating to the structure and the structural integrity of buildings and developments.

“Insurers and Reinsurers may need to carefully review or re-evaluate their risk exposure when it comes to insuring a Green Building. Materials and products manufactured and used in the Green construction process will be more “natural” and recycled materials, for example paneling made from recycled boarding or paper, wooden structures, bamboo and straw are likely to be widely used. This has an immediate impact on the risks of fire and other hazards or perils such as wind, storm, hail and even earthquake or earth tremors,” he says.

Jennings explains that the building process starts with detailed planning and calculating by the architects and designers of the structure and is finalized with the physical construction and execution of these plans. Throughout this process, various products and materials are used – all of which are assumed to sustain a certain life span and fulfill a certain function.

Currently, the majority of the design of buildings and structures is conducted through Computer Technology or Computer Aided Design (CAD) software programs. Because this technology was introduced to the building industry many years ago, it is relatively well known to the insurance industry – but this may not be the case with new software and programmes.

“Of course there are other risk considerations which the insurance industry will need to take cognizance of as more civil and building projects unfold. Over the next few years, it is likely that Green Building standards will be endorsed through government, government regulators, the Construction Industry and other organisations,” says Jennings.

According to Jennings, this means that there will also be enforcement through the legal system to ensure compliance and regulations are strictly adhered to – particularly regarding issues relating to rehabilitation of land (such as sand dunes) and carbon emissions. Insures and intermediaries are therefore well advised to keep up to date with all new developments in this industry.

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