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HSB Energy Efficiency Insurance

A performance guarantee for energy efficiency and decarbonization upgrades

Risk solutions for energy performance

For decades, building owners have turned to energy efficiency, water-, and carbon-saving measures to reduce operating costs and meet growing resource demands and expenses — often with dramatic savings. In addition, emerging technologies, such as AI, often come with their own rapidly expanding energy needs. Building owners with the counsel of Original Equipment Manufacturers (OEMs), Energy Service Companies (ESCOs), and technology providers seek funding for facilities upgrades from investors and lenders. This is a complex financial arrangement that involves not only credit risk but also risk around the assurance of technology performance. And often, ensuring energy and decarbonization performance is beyond the underwriting appetite of many lenders and investors.

HSB Energy Efficiency Insurance is designed to offer assurance of the performance of proposed upgrades so building owners — and the lenders and investors they rely upon — can make sound borrowing and lending decisions without the need to fully vet complex technology solutions.

HSB is uniquely positioned to offer this coverage thanks to its century-and-a-half-long heritage of engineering and technology expertise coupled with our industry-leading financial strength in underwriting.

The energy landscape is changing

30%

of global energy is
used by buildings

Energy and decarbonization are key areas for cost savings.

100k

households’ energy use =
a single AI data center

Energy-intensive AI is a critical technology for global economic growth.

4% / year

global growth
of energy demand

Led by Asia, energy demand is expected to increase through 2027.

Source: iea.org

Building owner benefits

Building owners gain confidence knowing potential project performance shortfalls are insurance-backed. This means they can enter into agreements with lenders who are more willing to provide financing, potentially at more favorable rates.

Bank / Financier / Investor benefits

The risk associated with complex technology is removed from the project, making the lending process far less complicated. Energy-saving projects therefore become more creditworthy. In addition, this coverage may facilitate a potential reduction in loan loss reserves.

OEM / ESCO / Special Purpose Vehicle benefits

With this coverage, the availability of project funding improves, and the balance sheet is protected. Performance shortfalls are insured, resulting in mitigated risk and increased customer confidence in delivering projects as proposed.

Energy efficiency coverage summary

Multiyear coverage options
Covers the difference between expected and actual energy savings due to defects in project design, implementation, or performance
Coverage is available for large single projects or structured as a portfolio
Eligible technologies include HVAC, lighting, building control system, building envelope, IOT devices, Real-Time Energy Management (RTEM) systems, machine learning processes, net decarbonization technologies, and more
Monoline EEI policy, or Contractual Liability Insurance Policy (CLIP)
Pricing is based on a percentage of expected annual savings
Customized coverage addressing the needs of OEMs, ESCOs, Special Purpose Vehicles, building owners, project lenders, and utility pay-for-performance programs
Requires an RTEM system or cloud-based monitoring of equipment and project performance

Single project: Medical campus upgrade

A university medical school campus in the United States upgraded the energy infrastructure of 5+ million sq. ft. of hospital, classrooms, laboratories, and offices. Utilizing an Energy Savings Performance Contract (ESPC), the university was able to finance comprehensive energy and resiliency improvements to the campus, working with an ESCO. HSB’s EEI policy provides a financial backstop to the ESCO, eliminating any balance sheet concerns of taking on the $4.8 million in guaranteed savings. The EEI policy also provides confidence in the university that the financial savings will be achieved. HSB’s technical underwriting process further validated the technology.

Construction Cost: $150 million, with $32 million in energy-related upgrades

Upgrades: A new central energy plan, district, energy systems retrofit, and campus-wide metering, lab controls, and lighting

Coverage: Multiyear term

Aerial office park view of building tops

$4,800,000

Guaranteed savings annually

Portfolio: Fast-food chain

A private equity firm owning 300 fast-food locations throughout the Western United States was weighing the risks of implementing a multi-ECM solution from an IoT firm. Given the unknowns, their initial approach was to slowly implement pilot projects at different locations over a five-year period. This approach changed with the purchase of HSB’s EEI policy, which raised the private equity firm’s confidence in both the projected financial savings and the expected performance of the technology. With the technical risk reduced, the private equity firm fast-tracked the implementation of energy savings upgrades at all 300 locations in their portfolio.

Technology Included: New HVAC rooftop equipment, new LED lighting, lighting control and monitoring system, centralized monitoring, sensors, and data analytics reporting