A number of insurers have shown interest in the WA Government’s plan to turn over underwriting of home indemnity cover to the private sector.

The WA Building Commission has advertised in two newspapers and on insuranceNEWS.com.au calling for expressions of interest from insurers.

Home indemnity cover, more commonly called builders’ warranty insurance (BWI), is required in the state for any residential building work worth more than $20,000.

At present the state acts as reinsurer, backing the only private insurers providing BWI policies – QBE and Calliden.

The commission’s Senior Project Officer David Proudfoot says the Government is keen to shift liability back to the private sector. 

The WA home building market differs from other states because it has an unusually high concentration of large building companies. There are about 1500 active builders, with the largest 20 accounting for 64% of the market. In other states the figure is 20-30%.

“The issue for the Government is mostly around the contingent liability,” Mr Proudfoot told insuranceNEWS.com.au. “While the risk is low, the exposure is high.”

The present arrangement has troubled the Government for some years, with WA’s Economic Regulation Authority recommending in 2013 that BWI be split into construction and warranty cover, with the building industry providing post-construction warranty insurance.

The State Government has expressed its willingness to negotiate a more flexible framework for the BWI scheme if it will help to attract more private insurers.

Negotiations may include refining the scope of defect cover and limiting the time within which claims for defects can be made – both major areas of contention between insurers and consumers.

QBE has previously expressed its preference to eventually quit the WA BWI market. 

Submissions to the WA Building Commission close on December 31. Click here for more information.