No news is meant to be good news, but this isn’t the case for builders in NSW and Victoria this week. They’re still anxiously awaiting some real movement from their governments following the decision on Friday by Dexta to halt builders’ warranty cover.

Not that Dexta – which holds about 50% of the market – had much choice in the matter. Alternative reinsurance being negotiated with a major European company fell over just before the deal was finalised, leaving the Sydney-based underwriting agency with no way to keep going. Abandoned by Swiss Re – which had given plenty of notice it was pulling the pin – Dexta was left high and dry with the late withdrawal of the replacement lead reinsurer.

The new builders’ warranty reforms introduced two weeks ago by the Victorian and NSW governments were supposed to attract more reinsurers into the market. But Dexta MD Ashraf Kamha said the global market is “in turmoil”.  There’s no doubt about that. With premiums increasing in all classes of insurance, reinsurers are focusing on short-tail and low-risk products.

Mr Kamha said existing Dexta Home Warranty policyholders’ cover remains valid and will be honoured. Dexta is continuing discussions with reinsurers and state governments.

An update issued by the Master Builders Association of Victoria states that the withdrawal of Dexta will have an immediate effect on Dexta domestic policy–holders. Members with annual policies will be able to trade as long as they are able to utilise remaining certificates with exchange of certificates and limit increases available. But MBA members seeking new job-specific policies will immediately be at jeopardy.

The holder of the other half of the market, Royal & SunAlliance, is also looking at its position. GM Specialty Shared Services Nick Kirk said the company is “stepping up” efforts to find an appropriate short-term solution. “We are investigating all aspects of this situation, including additional resourcing, but it is too early to determine a final position yet.”