by Michael Arny, LEED AP, and Mary Reames, LEED AP O+M — Most building owners and facilities managers know about the most publicized benefits of achieving LEED® (Leadership in Energy and Environmental Design) certification under the Existing Buildings: Operations + Maintenance rating system (LEED-EB: O+M)—a lower carbon footprint and a building that is operating at peak performance. Building owners often tell us that while they can appreciate those benefits, they just can’t afford the registration and certification costs. But here’s a question many building owners probably haven’t asked themselves: Can they afford not to pursue LEED-EB: O+M certification?
There are numerous benefits—financial and otherwise—that LEED-EB certification at any level can provide. In our next several articles, we will discuss some of the benefits that aren’t as well publicized. This month’s topic: insurance discounts.
A number of insurance companies provide discounts on building insurance for LEED certified commercial buildings. The premise behind the discount for LEED certification is the fact that building management is paying closer attention to the ongoing performance of a LEED certified building, and that this ongoing attention reduces risk. The first company to offer this discount was Fireman’s Fund, which began the incentive in 2006. We will use Fireman’s Fund’s discount as our example in this article.
Fireman’s Fund offers a 5% discount to insure LEED certified buildings. Fireman’s Fund’s discounted coverage for LEED certified buildings also includes rebuilding LEED certified buildings to LEED requirements if there is a loss. More recently Fireman’s Fund has begun offering the 5% discount to buildings that earn the Energy Star Label.
So what is the impact of a 5% discount on building insurance?
Using the national average cost of building insurance for Class A buildings of $0.42 per square foot per year (source: BOMA Energy Exchange Report, 2013), a 5% discount amounts to 2.1 cents per square foot per year.
One way to put this in perspective is to consider the impact for a 100,000 square foot building, which would see a savings of approximately $2,000 per year after achieving LEED certification. Because the discount applies to each year after certification, this is a recurring discount with a present value of about $9,000 for the first five years.
Another way to put this in perspective is to compare it to the LEED certification fee per square foot charged by the U.S. Green Building Council.
Certification Fee per Sq. Ft.
Annual Insurance Savings per Sq. Ft.
Fraction of Fee Covered
Present Value of 5 Years of Insurance Savings per Sq. Ft.
Fraction of Fee Covered in 5 Years
LEED for New Construction
45% of Fee
3 Times Fee
LEED for Existing Buildings
70% of Fee
4 Times Fee
So if you manage a LEED certified building and you have not yet captured an insurance discount, go after it. And if you are considering whether to attempt LEED certification, make sure building insurance discounts are on your list of reasons to go for it.
Leonardo Academy believes that whenever a meaningful framework for measuring performance such as LEED is created, the marketplace will find ways to financially reward excellent performance. Building insurance is just one example; what will be next?
Next up in our series: Water Savings (coming in the November Sustainability article on FMLink).