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Insurers 'should help pay for flammable cladding fix'

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The Victorian Cladding Taskforce has proposed that insurers chip in to pay for cladding rectification works on affected high-rise buildings.

The suggestion is one of many recommendations the taskforce made to the Victorian Government in its final report released today.

Premier Daniel Andrews announced this morning his government will establish a $600 million repair program and set up a dedicated agency to manage the funding and work with owners' corporations through the rectification process.

The Andrews Government set up the taskforce in 2017 to identify the number of buildings with combustible cladding materials and possible solutions.

According to the taskforce’s report, insurers should “make a substantial contribution to the rectification program” as the work would reduce their exposure to claims.

“If government funds and coordinates rectification as we have recommended, the liability of insurers for existing buildings is likely to be reduced,” the report says.

“Accordingly it is reasonable for government to negotiate with insurers with a view to their remaining in the market. Further to the extent that government provides funds for rectification, insurers receive a significant windfall gain.

“It is therefore reasonable for them to make a substantial contribution towards the costs of rectification.”

The Insurance Council of Australia (ICA) has rejected the suggestion.

“Insurers are at the end of the risk management process. The taskforce may not be aware that insurers have been losing $3.40 for every $1 collected in premiums this decade for professional indemnity insurance for building professionals,” ICA spokesman Campbell Fuller told

“The ICA rejects the assertion by the Victorian Government’s Cladding Taskforce that insurers would receive a significant windfall gain if the proposed plan to fund cladding rectification is implemented.

“The ICA believes the cost of rectification and compensation should be borne by the sector responsible for the issues in circumstances where property owners no longer have an insurance-derived solution.”

In the taskforce’s final report, it is also recommended that the Federal Government partner the states to negotiate with insurers to maintain professional indemnity insurance.

Governments should also explore fall-back options for providing professional indemnity insurance to building professionals if satisfactory arrangements can’t be reached with insurers, the report says.

Victoria, NSW and Queensland have recently moved to allow building surveyors to hold professional indemnity policies with cladding exclusions after the last provider stopped offering exemption-free covers this month.

Click here to read the full report.