Construction industry leaders met in Canberra this week to urge the Federal, State and Territory Governments to act now to address the building certifier insurance crisis that has potential to bring building and construction activity to a halt.

Denita Wawn, CEO of Master Builders Australia said, “The leader of Master Builders Associations from around the country are gravely concerned. Up to 30 per cent of insurance renewals for building certifiers and surveyors may not be renewed as early as July and construction activity will grind to a halt if a solution is not found urgently.”

NIBA CEO, Dallas Booth has attested that a crisis is certainly developing in relation to professional indemnity insurance for building certifiers and surveyors. He pointed out that Michael Bleby in the Australian Financial Review today references PwC data which suggests that this sector has been unprofitable for insurers since 2011, and that in 2017 insurers paid out $3.43 in claims for every $1 received in premiums.

Booth said, “On this basis, ‘the status quo’ is clearly not tenable, and it is not surprising at all that insurers are withdrawing from the market. Governments, building industry professionals, insurers and insurance brokers need to work on this issue very quickly.

“The true cause for claims payments of this nature has to be identified and dealt with, so the insurance community can do what it is supposed to do:  provide cover for what might go wrong, not what almost certainly will go wrong.  Only by fixing the cost of claims will a viable insurance market be able to return.”

He confirmed that NIBA is ready and willing to provide expertise to any discussions on these important matters.

ICA General Manager Risk and Disaster Planning Karl Sullivan said the state-by-state approach to solving building industry issues was too disjointed and inefficient. “The building certification regime in many jurisdictions is flawed, recent events show the construction industry’s problems go far deeper than the use of flammable cladding and other non-compliant materials.”

“Current risk-management regimes in construction are clearly failing to prevent avoidable and significant losses. Partial and piecemeal fixes by governments are not going to restore public and insurer confidence in the construction sector,” he explained.

Sullivan said failure to adopt a consistent approach to detecting and rectifying flammable cladding was causing insurers to reassess the pricing and availability of professional indemnity (PI) insurance for building certifiers and other building professionals.

Wawn explained that insurers as a result of a number of fires around the world, including the Grenfell fire in the UK, have elevated risk ratings on cladding affected buildings. They are declining to provide professional indemnity insurance, offering it with unacceptable exclusions or asking for unaffordable premium increases for building certifier professional indemnity renewals. As a result, certifiers who are needed to sign-off new buildings are being forced to close up shop.

“The problem is already causing delays to building projects across the country and will only get worse as more insurers withdraw from the market,” she said.

“Master Builders wrote to Building Ministers in April seeking action ahead of the July deadline and now we need all governments to come together now to manage what has become a risk for the whole industry caused by the use of combustible cladding on some buildings,” She concluded.

“Master Builders around the country are also calling for governments to speed up implementation of recommendations in the Shergold-Weir Building Confidence report to improve access to and the reliability of regulatory requirements for the building and construction sector,” Denita Wawn said.