Cloud hangs over builders’ warranty market
Uncertainty continues to surround the builders’ warranty insurance market, with major builders holding crisis talks in Melbourne last week.
The withdrawal of Lumley Insurance and CGU from the market by January 1 is set to affect around 25% of policyholders in applicable states, fuelling concerns about availability.
Builders’ warranty insurance is compulsory in all states except Queensland and Tasmania, and a lack of available cover will force builders to re-examine upcoming projects if they cannot obtain cover.
Builders said to account for half of all new homes built in Australia convened last week in Melbourne to discuss the issue.
Major providers Vero and QBE Australia have maintained they will cover builders provided they meet their eligibility criteria.
But Builders Collective of Australia President Phil Dwyer says even volume builders are struggling to meet these demands, because they have already pledged securities to the outgoing insurers. He says builders’ warranty is a long-tail product with claims entitlement typically extending more than five years from policy inception.
“This has the potential to be a disaster,” he told insuranceNEWS.com.au. “The insurers appear skittish and the majority of builders can’t afford their demands.
“One major builder has told me he thinks he’ll be finished come November 30.”
But Vero spokesman Sue Repanellis says securities are not a primary focus within the insurer’s longstanding eligibility criteria.
“We actually prefer not to take guarantees,” she told insuranceNEWS.com.au. “We’d rather the business was successful and had some equity in it.”
See ANALYSIS
The withdrawal of Lumley Insurance and CGU from the market by January 1 is set to affect around 25% of policyholders in applicable states, fuelling concerns about availability.
Builders’ warranty insurance is compulsory in all states except Queensland and Tasmania, and a lack of available cover will force builders to re-examine upcoming projects if they cannot obtain cover.
Builders said to account for half of all new homes built in Australia convened last week in Melbourne to discuss the issue.
Major providers Vero and QBE Australia have maintained they will cover builders provided they meet their eligibility criteria.
But Builders Collective of Australia President Phil Dwyer says even volume builders are struggling to meet these demands, because they have already pledged securities to the outgoing insurers. He says builders’ warranty is a long-tail product with claims entitlement typically extending more than five years from policy inception.
“This has the potential to be a disaster,” he told insuranceNEWS.com.au. “The insurers appear skittish and the majority of builders can’t afford their demands.
“One major builder has told me he thinks he’ll be finished come November 30.”
But Vero spokesman Sue Repanellis says securities are not a primary focus within the insurer’s longstanding eligibility criteria.
“We actually prefer not to take guarantees,” she told insuranceNEWS.com.au. “We’d rather the business was successful and had some equity in it.”
See ANALYSIS