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NSW Budget: action on cladding, but ESL remains

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The Insurance Council of Australia (ICA) has today welcomed a NSW Government package to rectify combustible cladding, but the state Budget also warns of further rises in the controversial Emergency Services Levy (ESL) on insurance.

Project Remediate will pay interest on loans by commercial lenders to building owners and owners corporations to fast-track the removal of unsafe cladding. At least 230 buildings have already been identified as high risk by the NSW Cladding Taskforce.

“Since the Grenfell Tower tragedy in 2017, ICA has been calling for urgent, nationally consistent action to identify and remove flammable cladding from high-rise buildings,” ICA CEO Andrew Hall said.

“Today’s announcement of a remediation program in NSW is a positive step towards resolving the use of flammable cladding and other non-conforming products on high-rise residential and commercial buildings.

“The Budget contains $139 million for a new Office of Remediation oversight agency to coordinate cladding rectification and certification, and the ICA looks forward to seeing the final details on the program design and loan scheme when it is announced in December.”

Mr Hall says insurers will “play their part”.

“Where cladding rectification is completed to the appropriate standard, insurers will reassess premiums to consider the lower risk,” he said.

He also says Project Remediate, and reforms in place under Cladding Safe Victoria, are models other states could consider.

“Insurers today call on all state and territory governments to reaffirm their commitment to adopting all 24 recommendations in the Shergold-Weir Building Confidence Report, and report positive progress at the Building Ministers Forum on November 27.”

However, there was less positive news on insurance taxes.

ICA has previously pointed out that tax on NSW home and contents premiums accounts for more than 50% of the cost. For commercial policies it is even higher – GST, state stamp duties and the ESL accounts for 60-70%.

While a review of property stamp duty has been announced, this does not appear to extend to insurance stamp duty.

And the ESL will increase again, by more than $100 million over four years.

“Revenue from the Emergency Services Levy (including insurer and council contributions) is forecast to be $1.3 billion in 2020/21 and $4.9 billion over the four years to 2023/24,” Budget papers say.

“The increase over the four years, relative to the 2019/20 Half-Yearly Review reflects the Government’s adoption of recommendations from the NSW independent bushfire review.

“They include investment in the state’s emergency services agencies and fleet replacement, personal protective equipment, mental health support and aerial fire-fighting and training.”

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