'There are positive signs that there is potential increased competition coming in' to provide new warranty schemes, MBIE manager says, with interest from Australia

There's interest from Australia to potentially bring new warranty products into New Zealand given the country’s building consent system is set to undergo major change, a Ministry of Business, Innovation and Employment (MBIE) manager says.

Alongside this, underwriters from London and Paris see emerging opportunities for warranty products coming into both Australia and New Zealand, Micheal Warren, manager of systems and market policy at MBIE, told Parliament’s Transport and Infrastructure Committee on June 18.

Warren’s comments come as the Government plans to shake up the country’s building consent system, with one aspect being a move from joint and several liability to proportionate liability.

In terms of defective work, joint and several liability means liability is shared between multiple parties - and the payment is shared by these parties. Proportionate liability means each party will be responsible only for the share of the work it carried out.

Professionals contributing to building design, such as architects and engineers, will be required to hold professional indemnity insurance. Alongside this, there will be mandatory home warranties for all new residential buildings that are three storeys and under, and for renovations of $100,000 and above - covering a one-year defect period and a 10-year structural warranty.

Home warranties cover the repair of defects for residential projects. The existing schemes NZ has include the Master Build 10-year Guarantee which is offered by the Registered Master Builders Association, the Halo 10-year Residential Guarantee from the New Zealand Certified Builders Association and Stamford Insurance.

The Government has also proposed to give itself the ability to temporarily suspend the requirement for building warranties and/or insurance. Building and Construction Minister Chris Penk, in a Cabinet paper, said this was "to manage risks to building sector continuity if sufficient insurance coverage is unavailable."

‘Potential increased competition’

Speaking in front of the Transport and Infrastructure Committee, Warren said they had also been working with insurers and the insurance sector to understand the “appetite for potential new providers to come in.”

"And the devil will be in the detail with regards to registration processes for those products," Warren said.

“Anecdotally, at a high level, there is interest coming out of Australia to potentially bring new warranty products into New Zealand once the shift [in] liability goes ahead."

“And also what we’ve heard is underwriters out of London and Paris, they do see an emerging opportunity for those warranty products coming into both New Zealand and Australia.”

Warren said they were still drafting legislation and the regulations that would support that.

“There are positive signs that there is potential increased competition coming in to provide those schemes.”

'Hopeful' that Building Amendment Bill comes to Parliament soon

Speaking to reporters last Wednesday, Penk said there were a couple of private entities that were interested in stepping into the market.

At the moment, there were only three who looked like they would qualify, Penk said, and at least one was an insurer.

Asked about reinsurers, the potential for them to leave during tough times and the impact of that, he said the would-be insurer in the space was pretty serious and credible, and were a long-term player in other fields or jurisdictions.

“I’m hopeful but we don’t need to rely on there being an additional one or two but it would be good if so," he said.

Changes to home warranty and professional indemnity insurance will be progressed through the Building Amendment Bill and Penk said he was hopeful this would be in Parliament in the coming weeks.