Lexington Insurance Co., a subsidiary of American International Group, has rolled out a green upgrade endorsement for its existing homeowners policy. So far the policy is available in the Northeast, but the company hopes to launch it in the rest of the country shortly.

The upgrade includes allowing policyholders to replace damaged systems with more eco-friendly, sustainable energy equipment or more energyefficient products.

“This is such an evolving industry,” said David J. Valzania, vice president of personal lines for Lexington. “Even if you had a relatively efficient home built five years ago, there may be many products available today that are more sustainable or eco-friendly. Maybe bamboo flooring instead of oak, for instance.”

The upgrade costs a “couple percentage points” more than the traditional policy, he said. “Our phone was not ringing off the hook by people asking for greener coverage. But when a home is damaged or destroyed, people are interested in repairing or replacing to as high a standard, and a greener standard, than in the past,” Valzania said.

Lexington is also in the process of developing products for nontraditional green homes, such as those built underground, with a sod or vegetative roof, or those constructed out of straw. The company also is working on a policy for homes that use alternative energy sources, such as windmills, solar panels or geothermal wells.

“If they had such features now and the home burned down, the equipment would be covered but the extra expense to buy generated power would not be,” Valzania said. “If they sold the extra power they createdany individual or entity that generates excess power can sell it back to a power company-then they’d need business interruption coverage,” he said.

As a nonadmitted carrier, Lexington tends to write policies for homes that admitted companies shy away from. Its book of business tends to be more catastrophe-exposed, such as for windexposed coastal properties or with more earthquake-risk exposure.

As an excess and surplus lines writer, Lexington can and does underwrite coverage for unusual homes, but on a case-by-case basis.The company hopes to roll out more standard policies or endorsements, and also is working on a similar policy for commercial property.

Fireman’s Fund is working on a green product for personal lines, but already has offered a green upgrade to people whose homes were destroyed by the October wildfires in California. (Best’s Review, Mar 2008)