The Queensland government will spend $623,000 developing a long-term indemnity scheme to protect out-of-home care and youth homelessness providers.

The 2024-25 state budget allocation follows an insurance market failure in the space, as private insurers withdrew from providing physical and sexual abuse (PSA) insurance for such services.

Tom Allsop, CEO of Queensland’s family service sector body PeakCare, tells insuranceNEWS.com.au an indemnity scheme is an important step in ensuring the viability of foster and residential housing programs – known as out-of-home care.

“A sustainable long-term solution backed by government is critical given the ongoing lack of available and affordable physical and sexual abuse insurance coverage in the private insurance market,” he said.

He says service providers have made advances in improving the safety of children in their care, yet government backstops are still required.

“Without a viable insurance alternative, many providers who care for children and young people will no longer be able to provide these essential services.”

The insurance market failure followed a surge in historical abuse claims and the removal of limitation periods, which put insurers on risk indefinitely for some policies. That left providers of foster and residential home care nationwide pleading for state governments step in.

An emergency scheme was hurriedly introduced by NSW, while Victoria has a two-decade scheme.

CGU, Vero and QBE all declined to offer out-of-home care PSA cover long ago as almost all insurers withdrew from the space about 2018 after the royal commission on child sexual abuse.

Ansvar exited the space in early 2022, saying it was “uninsurable” and “we can’t see a way of mitigating the risk”.

Its gross claims liability for PSA rose to make up 66% of its casualty claims provisions, and out-of-home care made up almost one-third of its PSA exposure.  

Ansvar still offers PSA cover for religious institutions, schools, aged care and other sectors, but not out-of-home care.

Sources tell insuranceNEWS.com.au two offshore insurers offer cover but it is expensive and does not apply to older incidents.

In May 2022, UK-based Beazley extended its Safeguard offer to the Australian market for group out-of-home care and residential care, but said foster care was “not within appetite”.

The royal commission found residential care and foster care made up about 42% of all institutional abuse cases.