NSW has extended its indemnity program to cover providers of out of home care (OOHC) for physical and sexual (PSA) abuse claims.

The scheme was initially established for one year, and has been extended for a further 12 months until December 31 2023.

The backstop was introduced after Ansvar Insurance withdrew from offering providers of foster and residential housing programs insurance for PSA claims, marking the departure of almost all insurers in a market failure spurred by a surge in historical claims.

Anglican Insurance & Risk Services (AIRS) CEO Neil Bull tells insuranceNEWS.com.au all states and territories are now offering a similar scheme to ensure essential care services can continue.

"Every state around Australia has implemented an interim indemnity program. There is an interjurisdictional working group trying to create national principles for all states to implement,” he said.

That group engaged Finity to do a review, which concluded in September that “it is virtually impossible for NGO service providers to secure suitable insurance coverage for PSA claims risk”.

It said key drivers were the removal of barriers in legal structures such as statute of limitations, leading to a substantial increase in the volume and amount of civil claims.

The longtail delay between abuse occurring and claims bring being brought made it difficult for insurers to accurately assess claims costs, Finity said, adding that insurers believe the current service delivery models mean providers are exposed to risks which are difficult to manage.

“Many insurers have concluded that PSA claims risk for providers of out-of-home-care and youth homelessness services is uninsurable,” Finity said. “This has left many NGOs and their boards with reduced appetite to provide the services.

“The potential impact of en masse service provider withdrawal would be catastrophic, and create significant service disruption for vulnerable children, young people and their families, increased service costs for governments, and potentially result in PSA survivors being unable to access appropriate compensation.”

The NSW Department of Communities and Justice says it will write to all participating service providers with indemnity agreements that expire next month and invite them to apply to extend their participation.