The NSW Government says a Ministerial Advisory Panel is expected to report back early next year on options around introducing decennial liability insurance (DLI) to cover new apartment building defects for up to 10 years.

Better Regulation and Innovation Minister Kevin Anderson says the panel, which will draw on expertise from industry stakeholders, insurers and Government representatives, is the next step in a strategy that has pursued a number of reforms aimed at boosting building trust.

“Decennial liability insurance is the end game for our NSW building and construction sector reforms,” he said.

“It rounds out our efforts to protect consumers by offering an extended safety net to protect apartment owners from the significant cost and stress of dealing with any potential serious defects.”

DLI, taken out by developers when a project starts, is available in more than 30 countries. It derives from the French civil code developed in the early 1880s.

Mr Anderson says DLI will also tackle the illegal practice of phoenixing, as only developers who demonstrate a commitment to a long-term market presence will be able to acquire an insurance policy.

“Insurers will be assessing developers’ ratings score, their corporate governance and balance sheets and while good quality work will be underwritten, the rogue developers shutting down and reinventing themselves will find themselves out of the market,” he said.

The State Government appointed a NSW Building Commissioner in 2019 to provide oversight of regulatory reforms in response to the Shergold Weir report. The DLI initiative is part of the subsequent Construct NSW strategy.

In July Mr Anderson announced a Building Assurance Solution to provide data on products used and compliance, which could help insurers price cover, and also announced a tool for developers to have their projects risk-rated.

The Insurance Council of Australia (ICA) says stakeholders are discussing future settings and solutions that may apply with the NSW Building Commissioner.

“Government has flagged an intention to introduce a DLI product, however it will need to establish the relevant mechanisms for industry to discuss the introduction of DLI,” a spokeswoman told insuranceNEWS.com.au. “It is premature to determine the factors relevant to the underwriting of the DLI product.”

ICA says the state government has enabled an independent market for ratings and in the infancy of that market, there is currently one provider.

“Each insurer will determine their adoption of ratings to their individual commercial considerations,” the spokeswoman says. “The general insurance industry has been engaged with the evolving Construct NSW program since its inception.”