Insurers paying to rebuild greener homes

Fireman's is offering other types of green upgrades, as well, including paying for less chemical-heavy paints and carpeting, flooring made from eco-friendly bamboo and energy-efficient appliances, heating and cooling systems — even if those upgrades cost more.

Fireman's Chief Underwriting Officer Don Soss estimates greener appliances and building materials will cost his company 15 percent to 30 percent more than conventional products, depending on the market. The company's green upgrade program will be free to its California clients affected by the fire, pending approval by state regulators.

Fireman's, which belongs to Germany's Allianz SE, plans to roll out a similar product nationwide in the U.S. early next year, at an as yet undecided additional cost.

Lexington expects to sell its "Upgrade to Green Residential" policy at a 2 percent to 3 percent premium to its basic homeowner policy.

Typically, insurers only pay damages to make clients whole again — not to improve their position, said Valzania. "This is taking it quite a bit further."

Although green products may be sold initially at a premium in some areas, in the future, homeowners who build to greener standards may be seen as lower risks and could be rewarded with insurance discounts or credits. That's already happening on the commercial building side and in auto insurance, where insurers in some states are offering breaks to hybrid-car drivers.

"Some insurers perceive a 'halo effect' in which adopters of climate-change mitigation technologies are viewed as low-risk customers," according to a report by the nonprofit research group Ceres, called "Insurer Responses to Climate Change." Ceres directs the Investor Network on Climate Risk, a group of 60 institutional investors that collectively manage more than $4 trillion in assets.

Such a halo hasn't happened yet in residential green insurance because the market is still too new, say insurers.

In the woods outside Aspen, Colo., Barbara Reese built a house of renewable straw bale, powered entirely by solar energy. The lime plaster-covered straw provides insulation, a substitute for conventional fiberglass. Solar panels and a back-up generator provide electricity, since Reese isn't plugged into the local grid.

Reese's building methods were unconventional, but the home was constructed with insurance risk in mind, said Michelle Johnson, a Neil-Garing Insurance Agency broker who helped get Reese's home insured by AIG's private client group. The private client group, which caters to wealthy individuals, has always been more willing to insure different homes.

"I built the home and built it off grid because I wanted to be kinder to Mother Nature," Reese said. "I wanted to live my life in accordance with my beliefs."

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