Important regulatory changes that will spur take-up of decennial liability insurance are under way as governments move to strengthen protections for growing numbers of Australians who will live in high-rise dwellings.

Most recently, in June, Victoria passed legislation giving developers the option to take up decennial insurance as an alternative to developer bonds that are required for residential blocks of more than three storeys.

The state is planning a long-term decennial insurance scheme for apartment defects, modelled on similar New South Wales arrangements that were legislated in 2022.

The Victorian government says decennial insurance will help to lift the quality of building work on new apartments in the state; reinforce consumer and investor confidence in these apartments; and reduce the need for complex and costly litigation to resolve disputes.

“While consumer protection is the focus of this reform, decennial insurance will also encourage and assist developers and builders to identify and rectify defects early, when they are easiest and most cost-effective to fix,” the government said.

Decennial insurance – also known as latent defects insurance – appeared in Australia for the first time in 2022, when Resilience Insurance launched the product offering 10 years of post-construction protection against major structural defects in residential, commercial, industrial and mixed-use buildings.

The cover traces its origins to early 19th-century France, under laws that mandated builders were liable for quality issues in completed buildings for 10 years.

Resilience Insurance CEO Corey Nugent says the insurer has been engaging with Australian governments and other industry stakeholders on how decennial insurance works and ways apartment owners can be protected.

“It’s more than just having an insurance product and being able to distribute it,” Mr Nugent tells Insurance News.

“It’s about education … ensuring everyone understands what it is and why it’s there and what service it actually provides, so we can move that needle forward on assuring consumers that what they’re buying is well built.”

The Resilience decennial product is the first and only approved latent defects insurance in New South Wales. It has insured more than 13,000 apartments across hundreds of development projects since its 2022 launch.

“Resilience is the market leader, we introduced the product, we are the only one in the market distributing that at the moment,” Mr Nugent says. “There will be others coming in … and that’s a good thing for consumers. It’s a good thing for the market, and it does provide a more robust proposition.”

Resilience has tweaked the product to meet the needs of the Australian market, such as extending protection for waterproofing and fire safety systems.

“We’ve expanded the cover to include a great deal more inside the coverage without significantly impacting the premium or pricing,” Mr Nugent says.

“There’s a range of things in there that we have expanded or introduced so the cover is, [compared with] what we see around the world, probably one of the leading covers offered for latent defects.”

As demand for decennial insurance grows, so has the number of brokers Resilience has authorised to distribute its product.

It currently has more than 60 brokers across every state and territory to sell the product, up substantially from the handful of broking distributors in 2022.

“We wanted to build up the product with a smaller cohort of brokers … and we’ve expanded that over the last two or three years,” Mr Nugent says.

“It is a complex product and, from that point of view, it is something that requires a broker to understand the complexity of that type of building, to be able to represent their client effectively.

“We have a number of brokers that come to us around the country that say, ‘We do this, and we’d like to distribute your product,’ and we’re not going to close the door.

“We still vet the applications one by one when they come in, and it’s more around the individual submission rather than the identity of the broker.”

Looking back, the journey has been challenging since Resilience decided to take a gamble and introduce decennial insurance to Australians, according to Mr Nugent.

However, it has been worth it, he says.

“It’s been a hard road to get to where we’re at … the education, working with governments and stakeholders, everybody has a different position. There are many, many stakeholders that we’ve had to engage across the way to educate and drive this forward, and there’s a lot more work to do.

“We led that change … now what we’re able to see is that decennial insurance is growing its own feet.”