The NSW Government has axed the privatised builders’ warranty insurance market and plans to take over the scheme.

NSW Premier Nathan Rees said yesterday he “will not allow a situation where NSW builders cannot get cover, potentially jeopardising a $20 billion industry which employs 250,000 people”.

He was responding to concerns from builders over availability of the warranty product following the departure from the market of CGU and Lumley Insurance.

Mr Rees says advice from scheme administers indicated “current market conditions are likely to lead to more insurers exiting the market in the near future”.

The State Government will underwrite the scheme from July next year, replacing existing providers QBE, Vero and Calliden. CGU and Lumley will stop writing cover by January 1.

The NSW Treasury will manage the new scheme through the Self Insurance Corporation. It will tender services to private insurers for the issuing of project certificates, premium collection and claims handling.

Any cover already issued by insurers will remain in force for the duration of the policy.

Builders’ warranty cover is compulsory in all states except Queensland and Tasmania for all residential building works over $12,000. Builders are legally prevented from building without it.

Vero spokesman Sue Repanellis says the insurer supports the decision.

“No one wanted to see it get back to the way it was before,” she said in reference to a supply shortage following the collapse of HIH Insurance in 2001.