Insurance crisis threatens construction sector

An impending insurance crisis risks bringing the construction sector to a halt unless Commonwealth, state and territory governments can work together to resolve the issue.

The Property Council of Australia has called for an industry roundtable on resolving the insurance crisis, as many building and construction businesses face closure over the issue.

They said it was essential for governments to come together on measures to address the imminent threat of the complete loss of insurance coverage for building certifiers which could significantly disrupt building and construction activity.

The Property Council said the Commonwealth needs to take a leadership role to:

  • Implement a nationally-consistent standard for risk assessment and rectification work for existing buildings with combustible cladding;
  • Establish a joint task force of industry and governments to design a program that will fund rectification works for building owners left exposed with no recourse;
  • Recommit to a nationally consistent approach and urgent implementation of the Shergold Weir report recommendations.

Insurers around the world have withdrawn exclusion-free professional indemnity insurance for building certifiers and other professionals including engineers and architects in the aftermath of fires involving combustible cladding products. For building certifiers, this has precipitated into a real crisis with building surveying firms now facing closure because they cannot secure affordable or workable insurance policies.

While Australia has taken action through its National Construction Code to improve safety standards in newly-constructed buildings, existing buildings with cladding are covered by a range of inconsistent and incompletely enforced state and territory regulations and guidelines.

The Property Council said this has made it almost impossible for building owners to secure affordable insurance and to plan rectification works for their affected buildings. Building owners can no longer get expert advice from professionals as they can no longer secure appropriate insurance cover for necessary work.

This has now led to instances of certifiers being quoted insurance renewal costs up to hundreds of thousands dollars higher, or facing the prospect of no insurance cover at all.

Property Council of Australia Chief Executive Ken Morrison said different levels of government have been passing the buck on putting in place nationally-consistent standards for building regulation and compliance.

“The cost of this intergovernmental merry-go-round is now being sheeted home as building certifiers are unable to do their jobs without insurance cover,” Mr Morrison said.

“This impending insurance crisis risks bringing the construction sector to a halt if it is not addressed urgently.”

He said the Commonwealth, state and territory governments have had the blueprint for action for more than 18 months in the form of the Shergold Weir report, which made 24 recommendations to improve building regulation and compliance across Australia.

“Our objective must be to strengthen confidence in the regulatory regime for building and construction across Australia through a nationally uniform approach,” Mr Morrison said.

“Despite strong industry support, governments have taken too long to get this done.

“First and foremost, the Federal Government now needs to play a leadership role and bring together all state and territory governments as matter of urgency to deal with the looming insurance crisis, as well as commit to deliver on the Shergold Weir recommendations.

“Public confidence in the built environment, not to mention the hundreds of thousands of jobs supported by building and construction, demand this level of action from our governments.”

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