06 September 2018

Building ministers call for consultation with insurers to tackle the cladding issue

Australia’s building ministers are calling for a national approach to the combustible cladding issue in reaction to increases in insurance premiums and tightening of professional indemnity insurance terms affecting the construction sector.

thumbnail cladding consultation with insurers2Bill Johnston (WA), Craig Laundy (NSW), Matthew Keane (NSW), Rene Hidding (Tas), Stephen Knoll (SA), Mick Gentleman (ACT), Mick de Brenni (Qld) and Richard Wynne (Vic) met at the Building Ministers’ Forum (BMF) in Adelaide on 10 August 2018, where it was decided to adopt a consultative approach to managing rising costs and quantifying risk associated with aluminium composite panel cladding (ACP).

The ministers agreed to

  • collaborate with the insurance industry to identify information and data to enable accurate risk quantification by insurers
  • share information across national jurisdictions to facilitate risk management across the construction industry
  • work with the construction industry to establish non-regulatory measures, such as new codes of practice and peak bodies’ standards, to help provide assurance to insurers
  • action a permanent ACP labelling system through Standards Australia.

Industry gap in cover

Gallagher Head of Construction – Australia & Asia Roger Irvine comments: "While we are seeing many insurers taking a flexible approach to underwriting of the cladding risk, it is very difficult to get any sort of cladding cover for building surveyors and certifiers in this market."

The forum also identified building surveyors and certifiers as being particularly in need of access to professional indemnity insurance cover and directed the building ministers’ senior officers’ group (SOG) to consult with the Building Regulators’ Forum (BRF) to work with insurers and other industry stakeholders to develop an Australia-wide framework.

Other actions covered included

  • updates to building codes
  • guidelines for responding to fires where cladding is present
  • reporting on the allocation of responsibility for costs of rectification of non-compliant cladding.

The BMF will reconvene in December.

“This is a solid initiative for the BMF, but December seems to be a long way away for them to reconvene," said Irvine. "The issues are happening right now, with the insurance market not being particularly supportive for the little guys." 

The cladding issue in Australia

Read Gallagher’s complete three-part report ‘Is Australia heading for a cladding crisis’ for a full analysis of the ACP cladding problem.

High-hazard property risks are explored in greater detail in the latest Gallagher Market Overview Report, Trust & Data: Into the Breach, which was published on 30 July. The report is available as a digital download.

Access the interactive online version of the report here.