Data Challenges in the Built Environment and Insurance Sectors

The characteristics of the built environment sector and its data are well known to be fragmented and siloed. From design to construction to operation, a building can generate massive amounts of data, such as Building Information Modeling (BIM) data, materials, products, and operational data. However, much of this data is unstructured, in the wrong format (e.g. paper, PDF, excel sheet etc.), unmanaged or forgotten/lost, and most of this data are closed datasets, not for sharing. Issues of too much data to handle and lack of data co-exist, while repeated data capture is common. It is hard to work out the “what, where and how” questions when it comes to data access in the sector. When data is captured, there may still be issues for understanding and using it correctly. 

There are some attempts to aggregate building related data by the sector to tackle the problems. The attempts include the Building Passport platform that focuses on providing building fire safety; the MADASTER Passport that registers building material and product records; the Building Renovation Passport (UK, EU projects) that collects renovation related building information in a logbook and plans building renovation roadmaps, and a few others. However, they are still siloed and built for limited purposes, and at their early stage. 

On the journey to net zero, the insurance industry is preparing to support the net-zero transition of the economy, including the built environment sector, through transferring and mitigating risks. A few big insurers such as Aviva have already set up their own net-zero targets and strategies. A group of leading Re/Insurers has formed a Net-Zero Insurance Alliance to explore net-zero underwriting potentials. Others partner with academics, regulators and legal experts to explore net-zero underwriting policies and tools for building insurance (e.g. ClimateWise Principles) and develop insurance contractual clauses to combat climate change (e.g. TCLP insurance clauses). 

Data lies in the centre of insurance businesses. However, similar to the built environment sector, data are siloed, fragmented and inconsistent in the insurance industry. Data sharing is complex and difficult within and in-between companies in the sector, and has been limited in a closed circle through bilateral contracts for many years. High data friction and blockages are pushing catastrophe modellers and underwriters to accept lower quality alternative data and outputs. For building insurance, data capture focuses on buildings’ resilience to current and future climate risks rather than their potential mitigation contributions to climate change. No climate change mitigation related parameters currently exist in building insurance considerations. The insurance industry lacks understanding of where they can find and how they can incorporate climate change related information into their risk modelling and insurance pricing process to enable net-zero insurance. 

To tackle the above challenges, the Icebreaker One Standard for Environment, Risk and Insurance (SERI) project worked closely with our industrial partners and advisory groups and developed a Climate-Ready Building Passport (C-RBP) concept in our SERI Phase 1 work. 

The C-RBP Concept

The C-RBP is a design for a data service enabled by SERI open data standards that brings together the physical, environmental, financial, risk and regulatory data of a building in a digital form and under a unique identifier through a federalised secured shared data governance platform. It can bring together the above building passport platforms and many other data services to provide a means to capture and share data on a building’s life cycle. The data for C-RBP includes building design, build, operation, maintenance, renovation; risks, resilience, carbon footage, sustainability, retrofitting roadmap; historical records, real-time monitoring etc. It covers not only general building information e.g. financial, structural, physical and environment information but also includes risks, claims and GHG emissions related data. 

Through our research we have identified a number of valuable data that are currently not considered in current building insurance but will be covered by the C-RBP service. This data includes:

• Smart data (e.g. IoT data for temperature, pollution, water, flood, fire, electricity, pumps, lighting, energy efficiency etc.)
• Earth observation (EO) data
• Building Information Modeling (BIM) Data 
• Energy Performance Certificates (EPC, inc. EPC Rating) and Display Energy Certificates (DEC)
• Environmental Product Declaration (EPD for embodied carbon)  
• Building Renovation Passport (BRP) data elements including logbook & roadmap (e.g. retrofitting records)
• Environmental, Social, and Corporate Governance (ESG) data
• CREMM/GRESB & risk assessment tools

The C-RBP can provide building owners, insurers and other stakeholders beyond the insurance value chain with the data they need with ease and security on their pathway to GHG reduction goals. It can also assist the insurance industry to better underwrite building insurance. Consideration of the above list of new data in insurance risk modelling and pricing process through C-RBP could potentially open the gate to net-zero underwriting to incentivise net-zero behaviors of their customers through rewarding better building performance and enable the creation of a range of innovative insurance products. 

Call for Support 

The C-RBP is currently a concept designed by the SERI project. To enable the creation of the C-RBP service, we need support from data providers and data service providers from both the built environment sector and the insurance sector to be part of the SERI shared data governance framework. We also need support from wider stakeholders in the insurance and built environment value chains for consultation to understand more on the values C-RBP can bring and how they can be maximized for industries. 

We would love to hear from you. If you think your work is directly involved in our work, please get in touch by emailing us at seri@ib1.org.

Photo credit: Photo by Samson on Unsplash

Figure 1 The SERI Shared Data Infrastructure, where API stands for the “application programming interface”, FAPI stands for the “Financial grade API”, and OAPI is  the “Open API”.

The SERI shared data governance framework is a Shared Data Infrastructure (SDI), built on Open Banking and Open Energy foundations and many open data sharing standards (e.g. preemptive licenses). The key components of the SERI SDI are Data Authorisation Service, Membership/customer relation management (CRM), Metadata Harvester and Database, and Datasets Search Engine. Data and data service providers are brought to the SERI SDI through membership agreements. Data providers publish their data descriptions and register their licensing options per type of use through preemptive licensing or open data licensing for data users to access at different levels. Data remains in data providers’ databases under their management, performing data cleansing, verification, updates and correction locally.  Data flows from member data providers to member data service providers through Application Programming Interfaces (APIs), where shared data flows through a secured financial grade API (FAPI), designed for industries (e.g. financial industry)  that require higher API security; open data flows through a public/open API (OAPI) that may incur security issues at circumstances. Data users can search data from the Datasets Search Engine and access them directly from data providers or data service providers by complying to their respective licensing requirements. Figure 1 illustrates the SERI SDI ecosystem and how data flows within the system. 

Within this infrastructure, collaboration with a wide range of stakeholders makes data discovery, aggregation, management, and sharing through federalised data services much easier and more efficient. Data governance within the infrastructure ensures a secure platform for many current Closed Data to be shared in confidence through preemptive licenses. This can potentially unlock a whole range of new data (e.g. financial, business and environmental data, especially mitigation data for climate change) for businesses to innovate and potentially incentivise net-zero behaviours.

The Phase 1 SERI SDI is currently conceptual, at its embryo development stage and needs well defined use cases to demonstrate its value and how it works. The SERI team has developed a Climate-Ready Building Passport (C-RBP) concept as a service from the framework, associated with an industrial verified insurance market use case from a broker’s perspective. This use case demonstrates what commercial values the framework can create and how it assists the insurance industry incentives net-zero behaviours. In this use case, a broker was helping an asset manager to insure their complex assets (with many old and not retrofitted). Although they received a list of data from the asset manager, there would still be a number of extra data needed due to various reasons such as missing data, errors, data not usable etc. They have to shop around for data to fill the gaps from various third party data providers in order to be in a good position to negotiate the best insurance outcome for their customers. Data is fragmented, scattered and hard to find, and data related to sustainability in general is not identifiable or available. It is very challenging to find all the data the broker needs. A new service is needed to resolve this problem.

Figure 2 SERI Shared Data Infrastructure – A Broker’s view from the Climate-Ready Building Passport Data Service (Where API stands for the “application programming interface”, FAPI stands for the “Financial grade API”, and OAPI is  the “Open API”).

Figure 2 maps the major components of the SERI SDI for the use case and demonstrates how the broker can access different types of data (either Open or Shared) through the C-RBP service. Through the service, the broker can easily discover various building information and building risk data (inc. both resilience and mitigation risks, either open or shared) from the C-RBP search engine on the framework from his computer. Once data is identified, the system will show him his eligibility to access and how to access the data, through open or preemptive licenses. Potentially he may only need to go through one of the data service providers of the framework to access all required data. He no longer has to ask around for data and go through many bilateral contracts/agreements. The datasets from C-RBP are all digital and machine readable, and are produced under structured data standards, making it easy to use and convert. This saves time, effort and money, and enables new datasets (e.g. operational data, emission data) to be discovered to give the broker insights to innovate.

Call for Support

We are currently seeking more input from stakeholders in the insurance value chain to develop the C-RBP and the SERI SDI further. If your work is in a related field and you’d like to be involved in this initiative we would love to hear from you, please get in touch by emailing us at seri@ib1.org.

Photo credit: Image by Pete Linforth from Pixabay

Where: Online, sign up via Eventbrite

Archived webinar:

Who:

• Nick Tyrone, SERI Legal & Governance Lead, Icebreaker One (Chair)
  
• Ben Howarth, Manager Climate Change and Open Data Policy, Association of British Insurers (ABI)
  
• Ted Christie-Miller, Senior Researcher, Onward
  
• Richard Hobbs, Chair, Acrisure Re
• Dr Bronwyn Claire, Senior Programme Manager, ClimateWise, Cambridge Institute for Sustainability Leadership (CISL)
• Stuart Shipperlee, Managing Director, Litmus Analysis

What:

As the climate changes, risks from environmental factors will increasingly impact both insurers and the insurance sector. Added to this, TCFD-related regulation and other climate-related regulation will soon be coming into effect. How will the insurance sector respond?

Establishing a sector-wide data sharing framework will be central to the solution – yet this faces several challenges. What regulatory framework would be required to make data sharing effective – or at least give it a kick start? 

In this hour-long event, these and related issues surrounding Net Zero and the insurance industry will be discussed. The SERI team will answer questions from the audience and share information on how to contribute to the SERI programme.

SERI (Standard for Environmental Risk and Insurance) is a UKRI and EIT Climate-KIC -funded programme.

1. To work with our partners in the insurance industry in developing climate-ready insurance products, and 
2. To develop the shared data standards and infrastructure that will underpin the data requirements arising from these products. 

What does climate-ready mean?

There is a lot in there, so let’s start by defining what “climate-ready” means in this context. Icebreaker One’s definition of climate-readiness is twofold. Firstly, climate-readiness translates into delivering net-zero by stopping new emissions and balancing out, or offsetting, all prior and current emissions. Secondly, it means that we need to  address the consequences of climate change, by adapting and becoming more resilient to its impacts

What are climate-ready products?
Building on this explanation, we have defined a climate-ready insurance product as one that incentivises certain behaviours in the business models of the companies and individuals buying insurance. This includes incorporation of net-zero objectives and outcomes into their business model and operations, and demonstrating greater resilience and adaptation in response to climate and environmental risks.

What does a climate-ready product look like?
So far, so good. But how do we begin to identify the set of potential products that can best deliver climate-ready objectives? How do we work with our partners in order to test the appetite of insurance buyers and market participants, and to understand the challenges – both in general and those specifically data-related – associated with creating these? 

The ideal climate-ready insurance product has something to offer to everyone involved – reducing premium costs for the buyer whilst also incentivising climate-ready behaviours, and reducing the risk to the insurer and also helping them to manage their own transition risk, and giving brokers a clear choice and opportunity to present to buyers. 

From an insurer’s perspective, how does the ability to demonstrate climate-ready characteristics impact the risk assessment and pricing of a client’s insurance? There are obvious impacts, in addressing the consequences of climate change, on climate and environmental risk – i.e. catastrophe insurance.  However, there are also potential impacts in terms of the client’s credit rating and business continuity risk. A client having a sustainable, net-zero supply chain is arguably one that is more likely to have a robust ability to cope with the potential risks to its business continuity that arise from climate and regulatory change.

Where SERI comes in 
We want to find use cases that already exist, and where the absence of appropriate insurance solutions is holding back progress towards climate-readiness. For example, we can look at new and innovative technologies that can help advance a climate-ready agenda in sectors such as the built environment, shipping and agriculture. Are there some technologies for which a lack of insurance coverage is holding back adoption? How can SERI help address the challenges in providing insurance cover for these technologies, through the availability of shared data standards and infrastructure?

We can also collaborate with other existing green finance initiatives, in order to understand the challenges they face in developing their own plans, and how insurance may be able to help address those, or where the development of data standards can solve multiple problems at once. Are there incentives that can be created on a wider scale, in terms of receivables and project financing, if we can demonstrate that climate-readiness has a material impact on a company’s credit risk, and hence its trade credit insurance costs?  

Our goal is to internalise the externalities – turning climate-readiness into a material impact for risk assessment, in terms of both financial and non-financial risks. We also need to unravel and address the data requirements that are needed to support the process of moving climate-ready insurance products from theory into reality.

You can help!
The SERI Policy Working Group will be looking at all of these questions and challenges, and will identify the levers of change required across the industry, policymakers, legislators and regulators in order to solve them. If you’d like join us on either the SERI Policy Working Group, the SERI project more generally, or to find out more about Icebreaker One’s work and plans, please contact us.