Despite energy efficiency not being an insurable risk canny insurers are making sure they offer their clients a complete service, including energy performance certificates and air conditioning inspections, and are ready for future any carbon emission-linked taxes. Katie Puckett reports

When your boiler breaks down, your insurer may not be the first person you call to fix it. But this has not stopped some of the industry’s biggest names launching services that delve into the deepest corners of their clients’ buildings and offer advice on improving their energy performance.

At present, there is no insurable risk linked to going green, and concerns over energy performance and the will to make physical improvements have been sidelined by the recession. But a number of insurers have spotted the market’s potential, and they’re staking their place early, offering services to provide energy performance certificates (EPCs) to their corporate and public sector clients.

“This is a sizeable opportunity,” says Alex Matthias, energy management leader at RSA.

RSA’s engineering team has been offering compliance services, such as health and safety to clients, for about 30 years, but in the past four years, Matthias says it has begun to offer environmental consultancy and energy saving guidance.

“We’re experts in compliance, we have experience in engineering and we insure a large number of companies who could be subject to EPC legislation.”

EPCs are just the first manifestation of a growing body of law that aims to reduce the environmental impact of buildings and will see a new breed of eco-friendly buildings, such as the Swiss Re tower. According to EU data, the built environment contributes more than 40% of the UK’s carbon emissions. While there are already much stricter regulations for new developments, it is the existing stock that covers the vast majority of the urban landscape that is the real problem.

Colour-coded charts

Under the EU Energy Performance of Buildings Directive, which came into force in January 2003, buildings are rated like household appliances for their energy efficiency, from A to G. The colour-coded charts familiar on new fridges and washing machines are now displayed in estate agents’ windows and public buildings around the country.

In England and Wales, since April 2008 every time a commercial building is leased or sold, the owner must provide an EPC, prepared by an accredited assessor. Public sector building stock does not change hands very often, so since last October every building must have an energy certificate displayed where visitors can see it, and update it annually so they can see the owner’s attempts to improve their building’s performance. And as of January this year, building owners must also have their air-conditioning units inspected every five years to make sure they are working efficiently. At present, all units over 250kW must be assessed, equivalent to system for a medium-sized office block, but from January 2011, the threshold will drop to 12kW, which covers most systems.

A number of major insurers have been offering EPC and air-conditioning inspection services since the legislation came into force (see box below), but they admit that take-up has not been great so far. This is because EPCs are only really required for property transactions, so in a static market there is less demand. “This is a property product and the market is suppressed,” says Steve Ford, special services manager at Allianz Engineering, which also offers EPC assessments.

“We’re really doing it where customers are being proactive because there are not many property deals going on.”

Opportunities for the future

It is a stretch to link EPCs to any insurable risk at the moment. “I suppose if you have an energy inefficient boiler, and you’re paying more for energy loss, you’re not as competitive and there’s less chance the business will survive,” offers Ted Kenrick, technical and risk solutions manager at Aviva. “But you’re not more susceptible to fire per se, and we wouldn’t be going on site and saying to a client ‘you must get your EPC done’.”

Where inspections are happening, Kenrick admits that insurers are not the most obvious providers of these services. “We find customers will tend to go through their managing agents rather than come to us. But it’s one of those things where there are opportunities in the future.”

For brokers, there is a clearer link: “The client highly values their relationship with the broker – if they have an issue, they go to their broker.” Both Aon and Willis now offer an EPC service to clients, Aon through RSA and Willis via two accredited energy consultants. “Larger property owners will have their own in-house broker, but smaller owners will deal with brokers and look to them to provide a range of services. There’s an opportunity for brokers there.”

AXA also offers an EPC service but head of customer risk management Doug Barnett says it is not giving it the hard sell – it’s just there if clients need it. “A lot of companies have jumped on the bandwagon and policyholders may be confused about who to choose. And if they’re not sure then the service is there.”

Barnett is concerned by the number of companies who have piled into the market, many of them offering bulk assessments at unrealistically low prices. As regulations on energy usage inevitably tighten an incorrect certificate could expose building owners to unnecessary costs. He questions whether firms offering such low-cost services have adequate professional indemnity cover, or whether they will still be around in a few years.

“If someone wants a high-quality service, we won’t be the cheapest. But the cheapest isn’t necessarily the best – you’ve got to question whether they can deliver. People have got to be aware that you’re not just getting a piece of paper, an EPC could have long-term implications.”

Carbon reduction

The real benefit to insurers of offering EPC assessments is that it is positioning them for the much greater opportunities that lie in store. Rating buildings is just the first step in forcing their owners to take steps to improve them.

From April 2010, the Carbon Reduction Commitment (CRC) comes into force for large companies and public sector organisations across the UK. Like the EU Emissions Trading Scheme on which it is based, the CRC offers a financial incentive to cut energy use by putting a cost on carbon emissions. Participants purchase allowances equivalent to their emissions each year and can trade them with other building owners. Unlike the EU scheme, which targets major polluters, the CRC will hit companies not traditionally thought of as big energy users.

Matthias says RSA’s service is evolving, in much the way EU legislators would hope. “Our clients’ initial requirements were being compliant – it was basically ‘keep me trading’. Now people are starting to review certificates, and they’re coming to us asking ‘where did our building fall down, what can we do?’ There’s more work to help customers understand how to improve.”

It is that next stage where the opportunity lies, and in laws that have yet to be made. The political parties are talking about linked taxes to carbon emissions, and it may only be a matter of time before building owners are flocking to those firms who can help them avoid paying out

A bluffer’s guide to EPCs, DECs and the EU EPBD

The EU Energy Performance of Buildings Directive came into force January 2003. In England and Wales, this means that since April 2008, every time a commercial building is sold or leased, the owner must produce an energy performance certificate (EPC) as part of the conveyancing process.

EPCs must be produced by an accredited assessor. They are valid for 10 years, but property owners can re-assess their building sooner if they have made improvements and want to reflect this in its rating.

Since October 2008, public buildings over 1,000m2 must have a display energy certificate where visitors can see it, and update it every year with the building’s actual energy use to show how they are improving its performance.

As of January this year, every air conditioning system over 250kW must be assessed to check it is working efficiently. The threshold will drop to 12kW in 2011. Certificates remain valid for five years; they do not have to be displayed but they must be available.

As the legislation comes from the EU, each member state can choose how to implement it. Northern Ireland has chosen a similar system to England and Wales, but in Scotland and Ireland there are differences – for example an energy performance certificate is called a building energy rating.

Who’s Doing What in energy efficiency

Allianz Engineering

Chose suppliers in 2007 before legislation came into force. “We were keen to work with people who were already in the energy efficiency market,” says Steve Ford, special services manager. Its service was launched the day the legislation came into force in April 2008, and air-conditioning assessments also started last year in advance of the legislation. He initially did presentations for 12 brokers across the South East to make them aware of the legal requirements on their clients, and has now visited the rest of the country. “As awareness has picked up, brokers who had presentations are coming back to us,” he says.


RSA’s engineering division has been working with Charterhouse Energy for three years to carry out EPC assessments and advise clients on making their buildings greener, and is in the process of signing up a second firm to advise on the Carbon Reduction Commitment scheme. In the 12 months from April 2008, it carried out 3,000 EPC assessments. Energy management leader Alex Matthias says he hopes to increase that by 50% this year, including air-conditioning inspections and advice on the Carbon Reduction Commitment. Aon has partnered with RSA to offer its services to clients.


Aviva’s has extended its arrangement with compliance consultant Bureau Veritas to include EPCs, and has been offering the service to its property investor clients since early 2008.


AXA has linked up with the Building Research Establishment, one of the bodies responsible for training EPC assessors, which runs its EPC assessment scheme using an accredited supplier. Since last April, Doug Barnett, head of customer risk management, says it has provided assessments for both institutional property investors with large portfolios of up to 400 properties and single-building owners.


Willis has been putting its clients in contact with two accredited energy assessors since the legislation came in.