Resilience Credits for FM Clients: Q&A with Joe Dimitriadis
In October, FM, an industrial and commercial mutual insurance company, announced $400 million in credits for existing policyholders to improve resilience and increase renewable energy use. The resilience credit was FM’s third in three years, providing a total of over $1 billion in premiums offsets to help clients protect their businesses against natural hazards. Insurance for Good sat down with Joe Dimitriadis, Vice President and Client Service Manager at FM, to hear more about the resilience credit program.
Insurance for Good: As a mutual commercial insurer, our readers may be less familiar with FM’s work. Can you tell us a bit about FM, especially your unique history when it comes to loss prevention?
Joe: FM has a unique business model. We are a mutual insurance company that provides property insurance in the industrial and commercial sectors. The truth is we haven’t deviated from the principles of our founder, Zachariah Allen. In 1835, Allen owned a textile mill in Rhode Island where he took steps to minimize the chance of fire loss to his mill and sought a reduced premium from his insurance company, only to be turned down. That didn’t sit well with him, and he started a mutual insurance company of like-minded factory owners who shared in the belief that “the majority of losses are preventable.” Those factory owners shared in the benefits of resilience together, which were the seeds of our membership credits and resilience credits today.
The concept that “the majority of losses are preventable” is still a virtue that we believe in today and is core to our business model.
We apply an engineering and research-based approach to risk analysis and mitigation, while most of the market uses an actuarial view to assign predicted average losses based on past loss history. We use engineers in field positions to visit key locations for our clients, identify exposures present on site, and provide a plan to help reduce the likelihood of that type of loss occurring or the magnitude of the effect it would have on their business. In fact, about a third of our employees are engineers. The data sheets used by field engineers are based on the science and research performed at our Research Centers in Rhode Island, Massachusetts, Singapore, and soon in Luxembourg.
The engineering-based approach, when combined with like-minded client partnerships, outperforms the market, which allows us to offer more favorable terms and conditions with competitive premiums over long periods of time. Since we expect our portfolio to outperform over long periods of time, we deploy uniquely large and stable blocks of capacity to first, support our clients, and second, to demonstrate our belief in our clients’ resilience.
In our local operations across the globe, the client service teams aggregate data from the field, present the findings to clients, and work together with clients to prioritize risk mitigation over agreeable time horizons.
Insurance for Good: You first offered a $300 million resilience credit in 2022 to allow clients to undertake climate resilience solutions, followed by $350 million in 2023, and $400 million in 2024. Why did FM decide to begin offering this credit? What is the resilience credit, and how does it work?
Joe: The resilience credit is new, but the concept is rooted in the virtuous cycle of being a mutually owned business. We have been offering membership credits to our policyholder-owners, our clients, for almost 25 years and have returned $6.5 billion in the last 25 years.
Since 2022, we’ve created a new way to add to the cycle, the resilience credit. In the last three years, we’ve provided more than $1 billion across three annual resilience credits. We’ve seen clients leverage these credits to protect against threats like wind, flood, and wildfire, driving a potential reduction in economic impact of more than $50 billion. And when we announced our 2024 resilience credit, we also encouraged recipients to leverage it to support recommendations related to emerging technologies such as solar panels, wind farms, or any other renewable energy installation.
When we return credits to our clients, we see the results manifest in additional resilience. In turn, the resilience of client locations reduces loss counts and the magnitude of the losses that occur. The reduction of losses supports our ability to provide additional credits, and the cycle continues. We have returned over 80% of our underwriting profit in the last few years to our clients. It seems like a simple concept, but it takes deliberate buy-in and effort from our clients’ organizations as well as the client service teams to achieve these market leading results.
Insurance for Good: One appealing feature is how straightforward the structure is: a five percent premium offset for policyholder-owners that qualify. How did FM decide on this program design? What are some projects that your clients have undertaken as a result of the credit, and what impact are they seeing on premiums and losses?
Joe: We have two types of credits currently. First, the membership credit we have been offering for decades is related to tenure and ranges from 5% to 15% of premium. Tenure is a key factor because the longer our clients partner with us, the more risk mitigation has taken place over time. The company recognizes the climate is changing, and we are not immune to those headwinds and the losses that can manifest from increased precipitation, wind, and sea level rise. The company recognized the opportunity to support our clients in the goal of protecting their facilities. FM clients share in the belief that we can protect today for a better tomorrow, and tying strings to the funds was not as important as efficiently sharing capital and engineering solutions to mitigate these exposures.
“We can protect today for a better tomorrow.”
The progress made as a result of the new resilience credit, an additional 5% premium offset, is tremendous. Since the initiation of the resilience credit in October of 2022, we have seen the efforts of our clients in a quantitative way. We see these credits as part of a circle of resilience: an effort to improve facilities, reduce the likelihood of losses, and drive better results for our clients and therefore FM as well.
Insurance for Good: Your October announcement also mentioned the launch of FM’s Renewable Energy unit. What opportunities do you anticipate as clients pair physical risk and greenhouse gas reduction investments together?
Joe: We launched the Renewable Energy Unit to support our clients and brokers. We were increasingly asked for our research-based approach in this emerging sector and to help accelerate new energy projects. Clients and brokers are responding to the worldwide adoption of emissions-reduction targets. This new unit is focusing on research, standards development, and loss-prevention engineering in this growing field. Renewable energy is at the top of our list for research priorities, everything from preventing lithium-ion battery fires to protecting against solar panel hail damage.
We’re learning from our partnerships with our clients, too. One renewable energy developer we work with had a wind turbine blade loss due to a lightning strike. This client responded by improving its inspection program. The client hasn’t suffered a similar loss since. This new inspection program also influenced our own loss prevention recommendations, helping make progress across the entire industry.
FM Approvals, our internationally recognized third-party testing and certification organization, has recently approved a gas detection system designed to identify rising concentrations of vapors that indicate early signs of failing lithium-ion batteries. By detecting rising vapor concentrations in the initial stages of battery failure, the system enables early shutdown helping prevent thermal runaway and enhancing the safety of battery storage systems and data centers utilizing lithium-ion battery technology.
Also, earlier this year, we launched the Intellium program to support data center clients. We’ve been insuring data centers for more than 25 years. Right now, they’re seeing massive growth because of increases in cloud computing and AI. They also face new risks, including power generation demands. The Intellium program is designed to help clients face this rapidly evolving risk environment with science-backed risk mitigation strategies.
Data centers are a long way from a 19th-century textile mill. But those same foundational principles going back to 1835—science-based approach, mutual partnership, and a relentless focus on resilience—are still with us today.
Insurance for Good: Any recommendations for others interested in pursuing resilience more deeply?
Joe: Our approach at FM rests on three core principles: protection, partnership, and progress. That’s how we’ve been supporting our clients for almost 200 years. That’s why we have initiatives like the resilience credit and that’s how we pursue resilience and approach the emerging challenges of the future.
