The NSW State Insurance Regulatory Authority has issued icare with a letter of compliance after a review identified Home Building Compensation Fund failings.

The review by forensic accountant McGrathNicol found problems with eligibility practices icare applied to building businesses granted insurance policies.

“icare has advised SIRA of action it has taken to address these historical issues and ensure future compliance with its obligations, as well as committing to further enhance its underwriting systems and processes,” the regulator said.

After considering the response and improvements, and that there was “no material harm caused”, SIRA says it decided to issue a letter of compliance.

“SIRA has taken proportionate regulatory action and is continuing to monitor compliance against relevant instruments ensuring homeowners are protected.

“This regulatory outcome demonstrates positive change across the scheme to strengthen underwriting practices and highlights the value in SIRA and icare working constructively.”

Licensed businesses that build or renovate homes in NSW must buy insurance to cover the risk of being unable to complete a project or return to fix defects.

SIRA says icare decisions about whether to buy and how much insurance a company is eligible to take have a significant impact on business’ ability to trade, and it is important eligibility decisions are made fairly and in accordance with the law.

The review examined records for financial years 2018 to 2022 in relation to 10 businesses granted insurance policies.

Issues included inconsistencies or errors in figures relied upon for adjusted net tangible asset calculations, and a lack of enforcement and monitoring of eligibility conditions.