As the push toward environmental responsibility gains momentum across industries, Canadian insurers are starting to adapt – not just in messaging, but in the products they offer.
According to Mark Whiteley (pictured), vice president of commercial insurance at Billyard Insurance Group, the insurance industry is gradually shifting its mindset when it comes to green building upgrades.
“We’re seeing a willingness to allow insureds to upgrade to more environmentally friendly products – even if they cost more than replacing with like-kind materials,” said Whiteley.
While insurers are increasingly supportive of sustainable upgrades, the road to widespread adoption remains complex. As Whiteley puts it, underwriting these projects is a “seesaw” – a constant balancing act between supporting environmental progress and managing the underwriting realities that come with it.
On one side of that seesaw is the long-term benefit: more sustainable buildings may help mitigate losses from catastrophic events. Features like improved energy efficiency and environmentally conscious design often signal better-built, future-ready structures. But on the other side, Whiteley says, is the practical concern of higher replacement costs and material complexities.
Take solar panels, for example – a common green feature. While they reduce energy consumption and support environmental goals, Whiteley noted that their placement can introduce new vulnerabilities.
“If you install solar panels on a commercial rooftop in a hail-prone area like Alberta, repair costs can be exorbitant,” he told Insurance Business.
In addition to the physical exposure, claims involving newer green systems can result in longer business interruptions, particularly when specialized parts or contractors are required. If a hailstorm damages solar panels, finding qualified professionals to make repairs quickly can be challenging – and for multi-tenant commercial buildings, that downtime can be financially significant.
There’s also the matter of actuarial uncertainty. Whiteley said that many green construction methods and technologies are still too new for long-term loss data to exist, making it difficult for insurers to price these risks with precision. As a result, insurers often apply rudimentary surcharges to account for the unknown.
“We’re seeing basic surcharges based on the nature of the installation,” Whiteley said. “For example, if solar panels are mounted on a roof versus the ground, insurers may apply a different rate due to the risk profile.”
Despite these pricing challenges, insurers still want to be seen as champions of sustainability – and that adds public pressure to support, rather than penalize, green construction. “They want to show they’re actively insuring these types of risks. But at the same time, they need to remain actuarially sound,” he said.
One area where insurers have already made notable progress is in green upgrade coverage, Whiteley said. Several insurers now offer endorsements that go beyond standard replacement cost policies, allowing policyholders to repair or replace damaged systems with more environmentally friendly alternatives – even at a higher cost.
“This kind of endorsement allows policyholders to upgrade to something greener, not just replace like-for-like,” Whiteley said.
While government subsidies for green retrofits have waned in some provinces, like Ontario, the private sector is stepping in to fill the gap, Whiteley said.
“The goal is to make a positive environmental impact with every policy interaction. If we can contribute to reducing the severity and frequency of catastrophic weather losses, everyone benefits – clients, insurers, and the planet.”
While there hasn’t been a seismic shift in the way insurers approach sustainable buildings in the past year, change is steadily gaining momentum. According to Whiteley, how the market evolves in the next few years will largely depend on one key factor: time.
“The more data insurers can gather, the smarter they’re going to get with pricing,” he said. Right now, with limited long-term claims data specific to green technologies and sustainable construction materials, insurers are still working to determine how these assets perform under stress – particularly in the face of extreme weather.
If loss histories on sustainable buildings remain favourable, Whiteley anticipates a softening of rates and broader adoption of green endorsements. But if those buildings begin to show negative impacts on loss ratios – perhaps due to high-cost claims or delays in specialty repairs – insurers could tighten their pricing models.
“It’s all about sample size,” Whiteley said. “The more opportunities insurers have to underwrite and assess these types of risks, the more refined and fair their pricing will become.”
