QBE and the SA Government are negotiating for the insurer to remain in the state’s builders’ warranty market for another year.

The deal would see the insurer act as an agent for the Government, with the state underwriting cover.

Last month QBE said it would quit builders’ warranty in SA because it believes the market is no longer viable. It is also reviewing its involvement in the WA market.

Now it is in talks with the SA Government Financing Authority (SAFA), according to a company spokesman.

“We are committed to working with SAFA to enable an orderly transition of builders’ warranty insurance and have confirmed our willingness to enter into an agreement for the delivery of insurance while a sustainable, long-term solution is developed,” she said.

Builder insolvencies are on the increase, while QBE raised premiums by 50% in March, according to SA Finance Minister Michael O’Brien.

QBE is the biggest builders’ warranty insurer in the state; its withdrawal threatened to leave homeowners and builders without the insurance they are legally required to carry.

The two parties are discussing an agency arrangement for July 1 to June 30 next year, which would give the Government time to investigate alternatives, Mr O’Brien says.

“The terms… are presently being negotiated and a formal agreement is expected to be signed in the coming weeks,” he said.” A preferred long-term insurance model will be developed and implemented as a priority.”

The SA Master Builders Association has suggested the state adopt the Queensland model, where statutory body the Building Services Authority regulates the industry, operating licensing, dispute handling and insurance.