Greener buildings: Early engagement is key for managing renovation risks

Over recent years, hundreds of heritage sites and industrial buildings have been successfully refurbished and given a new lease of life, turned into leisure, retail or commercial spaces. Think, London’s Battersea power station or Tate Modern, or the beauty of New York’s High Line park. The rate of building reuse, however, is expected to accelerate with the drive for more sustainable buildings and construction.

The buildings and construction sector is a major emitter of greenhouse gases, accounting for around 37% of global emissions. Reducing this footprint will require the modernization of the existing building stock, with a shift towards sustainable renovation over new builds. Around 85% of Europe’s building stock is more than 25 years old, and the majority is considered energy inefficient. At the same time, retrofitting an existing building emits on average 50-75% less carbon than constructing the same building new.

Policy drivers

This shift, while not without challenges, will be driven by several factors, not least the sustainability ambitions of governments, investors, developers and occupiers. Policy and regulation are also set to play a role as governments and local authorities use planning, building regulations and other policy measures to increase the rates of recycling, reclamation, and renovation.

The EU's Green Deal, which aims to cut emissions by 55% by 2030, includes various measures to lower buildings and construction emissions and increase the number of properties renovated to reduce emissions. The total energy renovation rate in the EU is just 1%, while the rate of deep renovations (that reduce energy consumption by at least 60%) is as low as 0.2%. The EU’s Renovation Wave initiative aims to double the energy renovation rate by 2030, which would see 35 million European properties refitted by 2030.

Complexity and innovation

Compared with standard new build construction, renovation and refurbishment projects tend to be more complex, and raise additional risk and insurance coverage considerations for risk managers.

Sustainable refurbishment is more than just cosmetic, and often requires invasive “deep-renovation” that involves substantial works to the building envelope (walls, roofs and foundations) and services. In addition, renovations often retain existing historical aspects of the building and involve the interaction of old and new structures, materials and services. For example, the combination of old and new pipework increases the risk of water leakage and damage, while retained building facades and unique heritage features are at risk of damage during construction.

Modern, sustainable buildings also make greater use of technology, such as environmental controls, sensors and power generation equipment, such as solar panels and battery storage units. These technologies can significantly change a building’s risk profile and give rise to risks that will need to be mitigated. For example, roof mounted solar panels can have an enhanced fire risk and may be exposed to damage from extreme weather events, such as hail storms. In one claim handled by Zurich, battery storage equipment housed in a basement was damaged by a burst water main.

Higher costs and delays

Another important consideration is the tendency for unknowns and unexpected developments during construction that can cause significant delays and additional costs. Plans and details of historical alterations may be outdated or inaccurate, while construction can reveal structural elements and materials that are of insufficient quality or strength by modern design standards and load requirements. Solutions to such complex problems are often expensive, while building approval processes for changes can be time consuming.

The need for specialist skills and materials is another potential cause of delay and additional cost. For example, stone masons or restoration experts are in high demand, and may not be able to return to site for many months, should there be a need to reschedule. Supply chains for specialist materials, products and technology are also likely to be limited, with long lead times for replacement goods. Supply chains and specialist skills are likely to come under growing pressure as renovation rates increase.

Building partnerships

The increased risk of ‘unknowns’ and the interaction of the new and old can make renovation and refurbishment projects more challenging. In addition, renovation projects are often located in busy urban spaces – such as historic city centers - which brings additional exposures and the need for risk controls, such as space constraints, access and traffic considerations.

While renovation and refurbishment projects can be complex, risk managers are well placed to manage the additional risks and uncertainties. They can also count on the support of insurers. Early engagement with the insurance market is particularly important to understanding additional risks, developing risk mitigation strategies, and tailoring insurance coverage.

Originally published in Commercial Risk on June 11, 2025.