Aon (London, UK)—Aon Risk Services recently initiated QUEST, “…a product developed to assist firms prepare for the launch of the [UK] government’s Carbon Reduction Commitment (CRC) scheme next year.”

QUEST stands for:
QU: Qualify and understand whether or not an organisation is impacted by the scheme.
E: Evidence an organisation’s carbon emissions and forecast for future usage.
S: Implement a strategy for managing and reducing a company’s carbon footprint.
T: Implement a carbon trading strategy to capitalise and potentially profit from any reductions in carbon usage.

Aon also created a personal indemnity insurance to accompany the program in case of errors in carbon estimates and reductions since large companies could potentially be prosecuted for not complying with the new UK scheme

Source: http://aon.mediaroom.com/index.php?s=43&item=1605 (Reliability 6)

NAMIC (Washington, D.C.)—Kathy Mitchell, federal affairs director for the National Association of Mutual Insurance Companies (NAMIC) commented on the July 29 House vote to extend the National Flood Insurance Program (NFIP) through March 31, 2010. Mitchelle lauded the extension, but pointed out the critical need to reform NFIP and subsequently provide a long-term extension the program.

“NAMIC supports several NFIP reforms that include mandated updates of the nation’s flood maps, the phase-in of actuarially sound rates for non-residential and non-primary residences, increased financial institution penalties for non-compliance, and the forgiveness of the program’s now more than $19 billion debt. If these reforms are adopted, it will move the program toward a healthier financial future. Additionally, it is critical to not include a provision for mandatory wind coverage which would only saddle the NFIP with even more debt and disrupt the entire national marketplace.”

Mitchelle indicated that the Obama administration is also opposed to the addition of wind in NFIP reform, but supports debt forgiveness.

Source: http://www.namic.org/newsreleases09/090729nr1.asp (Reliability 7)

AAIS (Wheaton, IL)—The American Association of Insurance Services (AAIS) announced its development of “…standardized builders’ risk insurance policy forms that provide coverage for loss exposures related to the ‘green’ certification of an insured project.”

The Forms are available on the the Builders’ Risk section of the AAIS Inland Marine Guide. “The forms will be filed in 22 states that do not exempt inland marine insurance from form filing requirements; the proposed effective date is Dec. 1, 2009.” One of the forms is “Green Building Coverage.” Under this coverage which “..can be endorsed onto a standard builders’ risk jobsite form,” there four additional coverages, including Indoor Air Quality, Recycling Debris, Recertification, and Electricity and Water Replacement.

AAIS explains that the coverages are “…triggered only by an insured loss covered under the base builders’ risk form.”

The second form is “Delay in Completion Coverage Part – Green Building Form.”

The AAIS forms provide for lump sum fees, interest and taxes, and extension costs such as

“…additional construction expenses, additional soft costs, loss of rental income, and loss of net income. Those extensions pay the added costs when a construction delay is extended because of additional procedures and processes required to meet the level of green certification that was incorporated into the project design before an insured loss.”

Source: http://www.aais.org/press/2009/Press072209.html (Reliability 7 )

Dewey & LeBouef (Washington, D.C.)—What is often overlooked in the American Clean Energy and Security Act legislation that is moving through Congress are the new rules for energy efficiency in building construction and renovation which, according to Dewey & LeBouef, “…may have a profound effect on the real estate market for years to come.”

“The bill mandates new federal, state, and local building codes to achieve energy reduction for construction of new buildings. It also provides national standards and unspecified financial incentives for energy-efficient retrofitting of existing buildings. The new building rules are requirements, whereas the retrofit program is at the owner’s election – a combination of financial “carrots” and “sticks” for the nation’s building owners.”

According to Dewey & LeBeouf, Aces will require that these targets be part of a national energy efficiency building code which local and state governments must adopt, or create their own which meets or exceeds the energy efficiency of the national code.

“There are additional awards for potable water savings, enhanced
awards for buildings in or eligible for listing in the National Register of Historic Places, and, for commercial buildings, additional awards for ‘other environmental attributes’ of retrofits, such as use of recycled materials.”

The legislation creates national energy efficiency targets:

• 30% reduction in energy use 2009-2013 (new residential and commercial)
• 50% reduction by 2014 (new residential) and 2015 (new commercial)
• Additional reductions after 2014

Aces also outlines incentives for retrofits to commercial and residential structures. Aces requires the development of a national energy efficiency building code.  State and local governments must adopt this code, or create their own code which meets or exceeds the outlined targets.

Dewey & LeBeouf outline issues with the ACES legislation that must be addressed including,

• Penalties For Non-Compliance,
• Professional and Contractor Liability Issues; Insurance Issues
• Appeals, Variances, Rulings, Interpretations
• Incentives for Retrofit; Enforcement Issues
• Increase the Retrofit Awards for Large Residential Building

Source: http://www.deweyleboeuf.com/ (Reliability 7 )

by Rebecca Powers

WLOX (Biloxi, MS)—Rebecca Powers of WLOX reports on her conversation with Homeland Security Chief Janet Napolitano at the Annual Meeting of the National Governors Association (NGA). Powers asked Napolitano why she would not even consider the “Multiple Perils Bill” when Congressman Gene Taylor presented it to Napolitano and the President the first time. Napolitano said, “Well, I don’t want to comment on a particular piece of legislation. Let me just say that our view is, what we need is to be prepared when natural hazards occur.”

Powers responded,

“You see our insurance went up 300 percent. It’s almost like making us all homeless again.”

Secretary Napolitano responded, “Yeah, I understand and that I understand it is a problem. And there’s legislation moving through.”

Powers said, “Will you look at it this time?”

“Well, it doesn’t go to me. It goes to the President,” Napolitano said. “But I’m sure; we’ll see it as it comes through the system, absolutely.”

Source: http://www.wlox.com/Global/story.asp?S=10751460 (Reliability 5 )

Source: http://thomas.loc.gov/ Reliability (8)

by Jessica Hanson

PCI (BILOXI, MS)—Jessica Hanson of the Property Casualty Insurers Association of America (PCI) reports on the 101st Annual Meeting of the National Governors Association (NGA). This year the annual meeting was held on the Gulf Coast in BILOXI, Mississippi. PCI joined the governors this year for the conference which highlighted emergency preparedness.

“PCI applauds Governor Haley Barbour and the NGA for making emergency preparedness a top priority at this year’s annual meeting,” said David Sampson, president and chief executive officer for PCI. “Balanced insurance public policy at both the federal and state level is critical for natural disaster preparation and recovery. The insurance industry is financially strong and prepared for hurricane season. But we must together begin preparing and building the capacity of the market to pay for losses the nation will face in the future.”

Sampson encouraged the governors to work with insurers to address the following important issues:

Reduce Exposure to Catastrophe Losses

“State and local governments should enact and enforce responsible building codes and discourage irresponsible development in unsafe areas through better land use regulation,” said Sampson. PCI supports stronger building codes as one of the most effective ways to prevent storm damage and urges states to improve outdated and inconsistent requirements for building codes and code enforcement.

Fix the National Flood Insurance Program

“The NFIP is critically important to Americans and the U.S. economy, and we urge Congress to make the necessary reforms to meet the needs of individuals and businesses across the country.”

State and Federal Government Involvement

“Many states along the Gulf and Atlantic coastlines have residual insurance markets for high risk home and business owners along the coast. These state-run property insurance providers play an important role in these markets. But experience in some states show that there are dangerous and costly results when a state-backed coastal insurer is underfunded and unprepared for a catastrophic risk.”

Numerous states including, Mississippi, Louisiana, and South Carolina, Florida, and Texas are implementing strategies to mitigate climate risk. Some of these strategies include:

1. Encouraging private capital to insure the state through balanced policies.
2. Reducing potential for massive insolvency in state-run insurance corporations, and reducing exposure of state catastrophe funds.
3. Reforming state legislation to assure market stability and provide assessment caps for insurers.
4. Promoting stronger homes through mitigation.

Source: http://www.pciaa.net/ (Reliability 7 )

H.R. 3026 The Hazard Mitigation for All Act
H.R. 3027 The Pre-disaster Hazard Mitigation Enhancement Program Act
H.R. 3028 The First Responder Innovation and Support Act of 2009

Other groups supporting the bills include,
The American Insurance Association
The Association of Bermuda Insurers and Reinsurers
The Property Casualty Insurers Association of America
National Association of Mutual Insurance Companies
The Reinsurance Association of America
The National Wildlife Federation

“These legislative initiatives will go a long way toward making America a more disaster resistant nation,” said William McGraw, co-chair of the national PIA working group. “We urge Congress to support this important legislation.” On the broader issue of natural catastrophe policy, PIA supports a coordinated natural disaster catastrophe program that covers commercial and residential property and does not compete with the private sector’s capacity to provide insurance; we also support insurers being allowed to price policies according to risk.

Source: http://www.pianet.com/IssuesOfFocus/HotIssues/naturaldisaster/7-21-09-7.htm (Reliability 7 )

RGGI States

The Regional Greenhouse Gas Initiative (RGGI) is a cooperative initiative involving ten Northeast and Mid-Atlantic states to limit green house gas emissions.

The RGGI uses auctions to raise funds for programs promoting clean energy and energy efficiency throughout the Northeast and Mid-Atlantic United States.

The signatory states have agreed to “…cap CO₂ emissions from the power sector, and then require a 10 percent reduction in these emissions by 2018.”

To reduce emissions of greenhouse gases, the RGGI participating states are using a market-based cap-and-trade approach that includes:

• Establishing a multi-state CO₂ emissions budget (cap) that will decrease gradually until it is 10 percent lower than at the start
• Requiring electric power generator to hold allowances covering their emissions of CO₂
• Providing a market-based emissions auction and trading system where electric power generators can buy, sell and trade CO₂ emissions allowances
• Using the proceeds of allowance auctions to support low-carbon-intensity solutions, including energy efficiency and clean renewable energy, such as solar and wind power
• Employing offsets (greenhouse gas emissions reduction or sequestration projects at sources beyond the electricity sector) to help companies meet their compliance obligation

The states include:

1. Connecticut
2. Delaware
3. Maine
4. Maryland
5. Massachusetts
6. New Hampshire
7. New Jersey
8. New York
9. Rhode Island
10. Vermont

Source: http://www.rggi.org/about (Reliability 7 )

Bryan K. Mignone

Brookings Institution (Washington, D.C.)—Bryan K. Mignone of the Brookings Institution advocates for “…a well-designed policy toward offsets…” in the Waxman-Markey bill, the American Clean Energy and Security Act, as the legislation moves forward through the Senate.

Such policy, he explains

“…could simultaneously enhance three key objectives: It could widen political support for cap-and-trade; it could lower overall costs of the program; and it could implicitly authorize a sensible amount of regulatory discretion. Most importantly, it would do all of these things while preserving and even enhancing the environmental integrity of the policy.”

Mignone suggests that proponents of the Waxman-Markey bill learn from the battle to pass the bill in the House . He points out the importance of getting votes from the farm states. The carbon offset aspect of the cap and trade piece of the Waxman-Markey bill is important to the farm-states.

Mignone recognizes an “unofficial coalition” which includes the farm-states, regulated industry, carbon traders, and environmentalists.

…farm-state concerns largely boil down to concerns about the treatment of carbon offsets, credits that could be awarded for activities outside of capped sectors, like sequestration of carbon in managed forests or in agricultural soils. Such credits could potentially provide a steady stream of revenue back to regions of the country that have historically been slower to warm to the idea of cap-and-trade.”

Those in support of expanding offsets also includes industry which believes that offsets could reduce the cost of complying with regulation.

Mignone advises that there are two important aspects to a successful carbon offsetting program.

“First, it would grant EPA, in conjunction with other appropriate agencies, like USDA, the authority to develop a comprehensive rulemaking to govern the certification of “high-quality” offsets. These projects would meet well-defined criteria for permanency (the length of time a project would be required to sequester carbon); additionality (protocols that ensure that the activities in question reduce emissions below the anticipated baseline); and verification (physical validation of the first two criteria). Projects certified under such rules, however great or small the actual number, could then generate credits functionally identical to emissions allowances.”

The second aspect would be dealing with what is likely to be the large group of offsetting projects that do not meet the stringent requirements outlined above.

Source: http://www.brookings.edu/opinions/2009/0709_climate_change_mignone.aspx (Reliability 8 )