QBE and the SA Government are in emergency talks after the insurer announced its withdrawal from the state’s builders’ warranty market.

The company says it will stop providing the cover from July 1 and is also reviewing its involvement in the WA market.

The SA Government has vowed not to let the market fail and negotiations are under way to defer the withdrawal. 

This could see QBE offer cover for another 12 months – underwritten by the Government – while a long-term solution is sought.

QBE says the SA market is no longer viable, with significant premium increases required. 

It is the only remaining major insurer in the SA market, “following the departure of almost all others”, a spokesman told insuranceNEWS.com.au.

“The current economic climate has led to significant builder insolvencies and homeowner claims.

“QBE will continue to honour the policies it has written and will work with the Government to develop a long-term solution that is sustainable for everyone.”

Many insurers no longer offer builders’ warranty cover because of its complexity and volatility, the spokesman says.

QBE is also assessing its position in WA, where it is in discussions with the State Treasury.

Master Builders Australia CEO Wilhelm Harnisch says states should review their legislation on builders’ warranty cover “to ensure that, should they be able to find another underwriter, the same problems do not arise that led to QBE withdrawing its underwriting”.

SA Minister for Business Services and Consumers John Rau says because the insurance is compulsory, “the State Government is committed to working with industry experts to develop a viable long-term solution to this issue”.

The state “will not allow market failure to occur”, he says. “There will be an insurance product available.”

Calliden continues to operate in SA for builders with turnover up to $3 million, according to Group Executive Marketing and Distribution Mike Hooton.

“It is a good business within our target market,” he told insuranceNEWS.com.au.

Calliden operates as a private insurer in WA, SA and Victoria, and as an agent in NSW.

Builder insolvencies are growing amid subdued economic growth, leading to claims rising above expectations, Mr Hooton says. Calliden has revised its underwriting criteria and increased rates in response.

QBE provides builders’ warranty insurance in the ACT, WA and SA, and is an insurance agent in NSW and Victoria.