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Pressure growing on governments for cladding action

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Pressure is growing on state governments to help fund building defect rectification as problems such as the Mascot Towers evacuation in Sydney add urgency to the issue, a Sedgwick executive says.

Victoria has announced a $600 million plan to assist with fixing combustible problems in some circumstances, but other states have rejected similar action as they continue to look at alternative ways to address the issues.

“There is enormous pressure in the other states at the moment to do something, but they seem to be holding firm,” Bruce McKenzie, National Manager Commercial Services and Major Projects at Sedgwick, told insuranceNEWS.com.au.

“My view is that it is inevitable it is going to happen and there is going to be some support.

“We are in a situation at the moment where we have buildings that are high-risk and should have work undertaken but, from a financial perspective, owners simply can’t afford to do it.”

Mr McKenzie says it is also important that timelines for fixing problems are not allowed to slip.

“The problem is that property values plummet for the ones that do have combustible cladding, the owners can’t sell, their insurance premiums are high and there is not a lot they can do until cladding [removal] work starts.”

Building owners seeking to reduce the cost of fixing cladding problems are finding enhanced fire prevention systems and other “performance solutions” are not satisfying insurers, he says.

Lower-cost alternatives to removing the cladding include partial removal, spray-on fireproofing and mitigation measures such as sprinklers.

Mr McKenzie says owners need to be aware that they might, at best, receive only a small premium reduction from alternatives to removal, even if measures have been ticked off through building rectification approval processes.

“The problem…is that insurers generally are not responsive to performance solutions.”

He says progress has been made in the past couple of months on understanding which replacement products are acceptable, and there is increasing discussion on improving the independence of the certification system to reduce potential conflicts of interest.

“This is getting back to a system where the certification becomes independent to the builder and there is more accountability shown,” Mr McKenzie said. “That is where we need to get to.”