The insurance product giving Australian property buyers surety

Following significant building industry reforms in NSW in recent years, the insurance industry has entered the apartment sector, offering insurance on quality building projects, for quality trustworthy producers. As the NSW Government under the administration of the Office of NSW Building Commissioner leads building regulatory change, the need for commercial solutions supporting consumers and those trusted building practitioners could not be timelier. Enter Latent Defects Insurance (LDI). Here’s what you need to know about this game changing product.

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What is Latent Defects Insurance?

Latent Defects Insurance (LDI)is an insurance product available around the world for decades but only now available in Australia. It provides insurance protection for structural defects and waterproofing defects in apartment buildings for a period of 10 years after completion of construction. This is a protection unavailable to consumers or industry previously, and it provides unequalled consumer confidence in the quality of building for purchasers while eliminating the destructive and growing litigation business model operating across the construction industry.

Why would an insurer offer this cover given the stories of poor building?

LDI changes the way building insurance is offered. Rather than reliance on history and in house certification, LDI requires a developer and builder to employ an independent inspection service all the way through construction. This inspection service must be approved by the insurer and the scope of inspections agreed before construction commences. The inspection program is detailed and includes design review, construction inspection, waterproofing inspection and testing among many aspects of assurance. This gives the insurer, the construction participants, and consumers much greater surety of compliance with standards and codes, safety, and delivery, enabling an insurance security to be offered after completion of the building project.

Won’t this insurance only add to the already strained affordability pressures?

No. In NSW, a developer is required to provide a 2 percent financial bond to NSW Fair Trading at completion securing the quality of building for a period of two years. This cost, the 2 percent bond is charged to the construction cost and therefore onto the purchaser of units. If that bond is returned to the developer at the end of two years, it is rarely if ever passed back to those purchasers. LDI is an alternative to the Strata Bond, meaning that the developer has a choice of providing the two-year bond or a 10-year insurance policy. The current experience for the cost of the LDI product is it is priced at approximately 1.5 percent. This means LDI is in fact cheaper than the current bond and reduces the impost on purchasers.

How does this benefit consumers and the building industry?

Latent Defects is a 10-year insurance cover with cover at the building value or $50 million. The strata bond is a two-year protection valued at 2 percent of the cost of building. The limitations on the value and time offered by the strata bond are and have been catastrophic for many consumers. It also brings about significant litigation risk for developers, builders, and financiers. Latent Defects Insurance is offered on a strict liability basis. That means there is no need to find fault to enable a claim, eradicating the litigation business model that costs all participants tens and often hundreds of thousands of dollars and many years of time and frustration.

Why would a developer not elect to purchase Latent Defects Insurance?

The product is only new to Australia, being offered in the open market in the past 12-months. Resilience Insurance is the first to offer this product. The insurance is offered selectively to developers and builders with quality building histories meaning those with a history of association to consumer harms or poor quality outputs will either not be able to obtain the cover. Other developers have relied on the return of the 2 percent bond in their own profitability models, taking that benefit to their business returns over tangible, transparent delivery and security in favour of their clients.

How do you ensure your property is protected by Latent Defects Insurance

Prospective purchasers should be asking their developer in the sales display suite if their property will have Latent Defects Insurance. There is already strong evidence and media reporting of consumers moving purchase decisions on this exact point. Ask your developer and their agents if you are getting a property with two years limited protection or 10 years full insurance protection. For developers, the security provided means that the risk of litigation is eliminated.

CEO of Resilience Insurance, Corey Nugent says:

Latent Defects Insurance is a vital protection for consumers and building practitioners changing the way building outputs are overseen and delivered. Ensuring quality and backing that product with full insurance protection enables apartment buyers to have confidence in their investment, without the fear of catastrophic future exposures.

Supporting the significant and necessary regulatory reform in NSW, Resilience Insurance has been able to offer this product benefiting confidence, transparency and trust in quality building product. Providing insurance protection for the benefit of apartment owners, removing the litigation risk for building industry participants and ensuring our apartment buildings are delivered to a quality benchmark are just some of the benefits of Latent Defects Insurance.

Australia’s housing debate is often dominated by affordability and supply, but a new collaboration between Brickworks and acclaimed architecture firm Kennedy Nolan argues the conversation should also focus on the quality and longevity of the homes being built.

The project, titled Our Next Neighbourhood, examines how suburban housing could evolve in response to shrinking block sizes, rising energy costs, increasing density and changing family structures.

Rather than proposing luxury dream homes, the initiative focuses on what its creators describe as achievable suburban housing models that are more flexible, sustainable, and better suited to modern Australian life.

Brickworks commissioned Kennedy Nolan to investigate what suburban housing might look like if “design, long-term liveability and enduring materials were placed at the centre of the conversation”.

The result is two housing concepts, known as the Street Terrace and Canopy Terrace, which explore higher-density living while maintaining access to green space, natural light and privacy.

The designs incorporate adaptable floorplans that can evolve as family needs change, along with passive design principles intended to reduce reliance on mechanical heating and cooling.

Brett Ward, General Manager of Marketing at Brickworks, said the company wanted to broaden the discussion around housing beyond simply increasing supply.

“Much of the housing conversation today is understandably focused on supply and affordability, but there is an equally important discussion to be had about the quality and longevity of the homes we build,” he said.

“We wanted to explore how thoughtful design, combined with durable, resilient materials, could create homes that not only function well today, but continue to support Australian families and communities long into the future.”

Kennedy Nolan said the project was partly inspired by concerns that contemporary housing often struggles to adapt to changing household structures and environmental pressures.

The architects said innovation in suburban housing was “essential” to address changing family groupings, energy use, urban heat island effects and growing disconnection from place.

According to the design team, the concepts draw on lessons from some of Australia’s most influential housing projects while seeking to create neighbourhoods with stronger links to landscape, community and local identity.

Rachel Nolan, founder of Kennedy Nolan, said the practice saw an opportunity to reimagine suburban housing as something “more connected to our climate, our landscape, our communities and our Australian identity”.

The project comes as policymakers, developers and planners continue searching for ways to deliver more housing without sacrificing liveability, neighbourhood character or long-term sustainability.

The insurance product giving Australian property buyers surety

Property is a key pathway to wealth. A new product ensures you get what you paid for.

Brickworks has enlisted acclaimed architecture studio Kennedy Nolan to explore how homes could become more adaptable, energy-efficient and connected to community.