Strata insurance specialist QUS has informed broking partners that its underwriting arrangement with AIG Australia will end on December 31.

The development means QUS will likely not accept new business and renewals unless a new capacity provider is found.

CEO Craig Hodgson relayed the news today in a short letter to brokers.

“We advise that by mutual agreement AIG Australia Limited will cease as underwriter of the QUS Strata Select Insurance policy effective 31 December 2021,” a copy of the letter seen by insuranceNEWS.com.au said.

“Claims on AIG underwritten policies will continue to be managed by the existing AIG QUS claims team, whose contact details remain unchanged.

“The Board and Management of QUS are currently working to establish new underwriting arrangements from 1 January 2022 and will communicate these in due course."

insuranceNEWS.com.au has reached out to QUS for comment about the current development. A spokesman for AIG said the insurer declined to comment.

Steadfast, which holds a 45% stake in QUS, says the search for a new underwriter is ongoing.

“Without a doubt the executives of QUS have been searching for some time amongst the major players in strata in Australia to replace AIG,” Steadfast CEO Robert Kelly told insuranceNEWS.com.au.

He says the QUS portfolio is around the $45 million mark in gross written premium.

“My understanding is that they are still in discussion with one other [capacity provider] who has yet to say yes or no.

“Due to the obligations of the agency to inform its policyholders in a timely manner, they have elected today to inform the market.

“That may change over the course of the next week or so. My understanding is if they can’t get an underwriter, they will put the current portfolio into runoff with effect [from] December 31 and maintain the underwriting capacity that they have got, and continue to search for another underwriter into the new year.”

Queensland-based Strata Insurance Solutions Practice Manager Tyrone Shandiman says QUS has been a pivotal part of the business’ insurance offerings to clients.

“We are hopeful they will be able to secure an insurer to support their Strata Select policy in time for their binder renewal,” Mr Shandiman told insuranceNEWS.com.au.

“Premiums for strata insurance have been increasing consistently for the last four years and we thought this would lead to a more sustainable strata insurance market.

“I think AIG’s withdrawal demonstrates the difficulty insurers have faced in running a profitable strata insurance portfolio.”

Strata insurance industry insiders say they are not totally surprised by today’s announcement from QUS, which offers residential and commercial solutions.

They say they have heard about QUS trying to secure a new underwriter but the timing of the development so close to the end of the year is unexpected.

“I have heard for a week or two (about it),” a strata insurance executive, who prefers not to be named, told insuranceNEWS.com.au.

He says the strata market conditions remain difficult due to a number of factors that are also affecting the property sector. These include tight reinsurance capacity and recent natural catastrophes that have put a strain on margins.

“It’s exacerbated by the weather patterns and we’re having La Nina, we’re seeing storm events all over the place,” he said.

Strata Ratings MD Simon Plummer says the news of QUS and AIG parting ways at the end of the month has come as a shock to the industry.

“However the struggle to retain incumbent insurers appears to be common for the smaller underwriting agencies in the strata space,” he told insuranceNEWS.com.au.

“This is of course concerning for owners corporations throughout Australia as until QUS finds new security, it will mean one less option come renewal time.

“Whilst QUS arranges new capacity, it may push some consumers to use lower-tier products which have serious limitations come claim time.”