Vero drops builders’ warranty insurance

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8 February 2010

Australia’s largest provider of builders’ warranty insurance has announced it is pulling out of the market, evoking fresh memories of the post-HIH coverage crisis.

Vero’s decision to stop writing the cover from June 30 carries major ramifications for the national residential building industry because the insurer controls at least 40% of each of its markets.

The company says a decision by the NSW Government to underwrite builders’ warranty insurance in NSW from July 1 was the catalyst for its withdrawal.

“Given the size of the NSW market in relation to Vero’s home warranty business, this decision has prompted Vero to review its position as a national provider,” the company said in a statement.

The cover is compulsory in all states except Queensland and Tasmania. Builders must hold it in order to build.

Under the existing system a shortage of available capacity has the potential to jeopardise residential projects across Australia.

State governments are under increasing pressure to step in and resolve the situation.

Master Builders Association of WA Director Michael McLean warns homebuilding activity in the state “could grind to a halt” in the absence of Vero.

He says WA’s $4 billion housing industry faces shutdown following the withdrawal of Vero, its largest provider of housing indemnity insurance, and called for urgent action by the state government.

“We do not want a rerun of the disastrous HIH collapse of 2000 when builders were unable to obtain insurance and were prevented from earning their livelihood.”

Vero maintains that all current policies will remain valid for the duration of existing terms.

“Vero is working collaboratively with relevant governments and all stakeholders to ensure a smooth and timely transition out of the builder’s warranty insurance market,” it said.

Only QBE and Calliden will remain as private providers after June 30.

Calliden Group Executive Marketing and Distribution Mike Hooton told insuranceNEWS.com.au it’s “business as usual” for the insurer, while QBE declined to comment when approached by insuranceNEWS.com.au.