Written by: Davor Car, Director of Risk and Insurance Engineering, GrECo Croatia
The construction industry is increasingly under pressure to become more sustainable, not only due to European Union directives and the goal of achieving climate neutrality in Europe by 2050. Indeed, global demand for sustainable buildings in larger cities is increasingly outpacing supply.
Let’s look at the most basic timeline of construction: conceptual design, feasibility assessment, securing financing, seeking insurance, hiring developers, and construction. This seems straightforward, but with sustainability becoming increasingly important, there are obstacles to overcome.
Custom Solutions
The biggest question in any construction project is where the financing comes from. With the implementation of ESG, banks are increasingly prioritizing green financing for companies and projects with a sustainable ethos. They use concepts based on the EU taxonomy as a framework to guide their financing decisions or have new key performance indicators for reporting, such as the ratio of green assets. They then want to know whether the construction project is insured and whether all risks are covered from the start to the end of the project. However, no project will be financed without appropriate insurance. Systemic changes like ESG bring new risks, which raises the question for insurers of how to calculate and assess these new risks that were not previously known. When such difficulties arise, insurers may refuse to cover a specific risk, which then calls into question the bank’s financing and requires significant additional collateral.
For green construction to secure financing and insurance, an open dialogue between the industry, insurance, and the financial sector is necessary, and an insurance and reinsurance broker with extensive experience in renewable energy and the construction sector is an essential step in creating this dialogue. Insurance coverage and guarantees – the obligations of the insured to protect themselves from potential claims can be abundant in technological requirements, and achieving a balanced compromise between price and scope of coverage to still ensure the value of insurance is crucial. A good broker will approach each risk individually and foresee newly emerging risks that have not been seen or were not influential before. They will provide tailored solutions to their clients. This is what we pride ourselves on at GrECo, and we have seen the greatest successes with our clients as they transition to a greener future.
