Getting Ahead of Insurance
Getting Ahead of Insurance
As an asset manager, property insurance is a critical component of risk management. However, climate change is putting increasing pressure on insurance carriers, and they are raising the cost of policies, not just in California but all across North America. It isn’t just in fire or flood prone areas, but in most cities and rural areas alike.
You may not have thought about regenerative development as being tied to your insurance premium; however, in many ways this holistic approach can actually improve and protect an asset’s rates and ability to secure insurance as well as reduce your overall risk of loss. Let’s explore a few ways regenerative investments can do this.
The most obvious area is in fire mitigation. A regenerative development in or near a forested area will not only include forest management practices that create a beautiful old growth look to the forest around the development, but this work in fire mitigation language is consider a “shaded fuel break”—something firefighters and insurance companies desire to reduce the ability of a fire to get close to buildings. Another regenerative practice is planting native, often drought resistant plants instead of non-native species, due to their use of less water. These plants not only use less water, yet they are likely to be less dry in a drought and therefore less flammable compared to plants not meant for the area.
Another property insurance risk, flooding, is exponentially helped by regenerative developments. Traditional developments add significant impervious cover that increases runoff during heavy rains leading to an higher likelihood of flooding. Regenerative developments work to minimize impervious cover, increasing the ground’s capacity to hold water rather than create runoff. Regenerative developments also work with the surrounding watershed- adding swales to slow water flow, restoring riparian health to improve waterway capacity, replanting native habitats that slow water flow on slopes during rains, and often diverting water into natural waterways and away from buildings. While traditional development will create “holding”areas to offset their impervious cover and the effects of a property bulldozed to place buildings for best views or highest density, regenerative developments work with the terrain and natural flows to preserve as much of the existing topography thus reducing the man-made effects that lead to increased flooding. Working with the land means placing buildings outside of areas where nature naturally processes heavy rains,instead of fighting against nature with heavy machines and attempts to reshape it—which we are seeing more and more often rarely work, especially as climate events become more severe.
A last example is building issues with mold are becoming more commonplace as climate heats up and buildings are subjected to greater swings in temperature. Existing building materials are often breeding grounds for mold and other toxins because they were meant for more temperate weather and dryer climates. Regenerative building science is pushing material selection to include renewable materials like hempcrete building blocks and hemp wool insulation which are known to have antifungal properties that inhibit the growth of mold. The cost of mold in both shutting down a building for mold remediation and the potential for lawsuits is extremely high. These new building materials are leading the way to reduce this risk.
These are just three of the ways regenerative developments help mitigate property risk for owners. But beyond this, insurance companies are becoming ever more diligent in asking if a building has prepared in these ways and there may come a time where asset managers will be required to do the things regenerative developers are already doing or risk nonrenewal of the property insurance altogether.
If you are considering investment in ground-up developments, consider looking for ones that focus on regenerative practices like Anura Capital’s projects. It’s not just good for the planet, it is good business.
To learn more please contact Spotlight Family Office Group at Info@SpotlightFamilyOffice.com.