Expert Risk Articles

Reinstating Buildings to Green Specifications

Allianz and HSBC Insurance are partnering to provide clients with green reinstatement insurance. This kind of cover encourages builders to create more energy-efficient structures.

The rising trend of sustainability and green building insurance

It may surprise some to know that HSBC – the world's local bank with over 100 million customers – is also a major insurer, with more than 15 percent of its total profits in the first half of 2009 coming from both life & non-life insurance products. Under its bancassurance strategy for personal and business customers, HSBC distributes AGCS products in several countries.

The two global players also share an interest: sustainability is a priority for both companies and they are keen to ensure their products offer green and sustainable benefits to their customers wherever possible.

At HSBC green buildings insurance was identified as a valuable opportunity. "First generation" green insurance products consist of donating part of the premium to charity. "Second generation" green insurance products actually aim at embedding the green element in the product itself. The concept of green reinstatement is fairly easy to understand. If there is a loss, the insurer replaces the damage in a "greener" way than normal.

When HSBC Insurance decided to offer green products, the first step was to lead by example. This is how the idea of implementing green reinstatement within HSBC's own buildings insurance came about. The multi-regional program is underwritten by Allianz and covers several thousand offices, branches and data center worldwide from which HSBC operates.


HSBC has teamed up with AGCS to provide green reinstatement insurance.

Green building insurance and modern solutions

More advanced environmental standards

Sunny Sehgal of HSBC Insurance summarizes the benefits: "The new reinstatement clause allows HSBC to rebuild according to more advanced environmental standards than would have been possible otherwise (under the regular reinstatement) and so fits well with the environmental management system that HSBC operates across its corporate real estate. In monetary terms, the clause allows an additional five percent on top of the 'normal' insured loss amount, and incurs only minor additional premium."

Green reinstatement is enabled by the increasing use of government-approved environmental standards and green building codes, such as the United States' Leadership in Energy and Environmental Design (LEED) and the Building Research Establishment Environmental Assessment Methodology (BREEAM) in the UK. These codes are stricter than local minimum legal and planning requirements, so the insurer plays a vital role in encouraging green design.

Gavin Lillywhite, Account Manager at AGCS for HSBC on the multiregional program, comments: "There are two ways for insurance companies to increase sustainability: sustainable claims and pricing for sustainable behavior. The green reinstatement product combines these two areas and is an approach that we will continue pursuing in the future."

Green benefits for private homes

This initiative has directly led to the green reinstatement benefit being offered to HSBC's customers through several HSBC home insurance products around the world. In Hong Kong for example, where HSBC Insurance manufactures home & contents insurance, if a customer has an accident with a household appliance, such as a refrigerator, room-cooler, washing machine, dryer or water heater, they will receive a replacement with a green energy saving label at no additional cost.

Martin Brewer, Head of Strategic Partnerships & Green Insurance at HSBC, states: "We care passionately about the environment and know many of our customers feel the same way. So, for us it is important to develop and exchange best practices with our preferred partner Allianz and share the sustainability skills and expertise between the two market leaders. We are looking forward to continuing our successful collaboration and extending our green portfolio for the benefit of our customers."

Download "Global Risk Dialogue" spring 2010 (4 MB)

  1. Expert Commentary

    AGCS is one of the first insurance companies to have developed a green clause on the French market. This clause covers mainly office buildings located in France for the additional costs of rebuilding after a loss, according to the green French standards BBC (Low Energy Consumption Building). The additional business interruption due to the extra time required to respect these construction standards is covered too.

    Our green clause was recently proposed to one of our main insureds from the automobile industry, who is involved in sustainable development. Beyond the insurance cover this clause reinforced our partnership with a client sharing the same values as AGCS.

    /assets/Global%20offices%20assets/France/Photos/JBREGNIER.png Jean-Baptiste Regnier

  2. Michael Stout on Green Insurance

    Interest in green insurance has grown steadily since Fireman's Fund Insurance Company, a member of the Allianz Group, first introduced this coverage to the U.S. commercial marketplace in 2006.

    Green insurance was initially aimed at the commercial real estate market but over time has grown to include manufacturing risks as well as personal lines (homeowners). The increased public interest in the environment has resulted in more insurance companies entering the marketplace, providing more capacity and different products.

    McGraw-Hill Construction predicted in 2008 that the US green building market could triple by 2013. While that growth has no doubt been slowed by the current global economic conditions, McGraw-Hill expects green building to grow due to increased public awareness, government regulation, and the potential benefits in reduced operating costs.

    /assets/Thumbnails/Thumbnails%20for%20Experts%20and%20Contacts/stout-michael-thumbnail.jpg Michael Stout

    Michael Stout has broad experience in Property Underwriting within Allianz Global Corporate & Specialty and heads the expert group on Technology.