London-based HDI Specialty has become the “latest white knight” to make changes in the Australian professional indemnity insurance market by not renewing a binder relationship it had with a London-based MGA supporting Bric, leaving the country’s largest broker of PI insurance scrambling to find an alternative provider for as many as a fifth of its clients.
Pat Beaumont, manager of professional risk at Bovill Risk & Insurance Consultants (BRIC), said that with HDI Specialty decision to stop issuing new policies and not renew the existing policies of some 100 building certifiers it had signed up, the Melbourne-based broker and underwriter Landmark had to try to find other insurers to replace the cover.
“There’s no certainty in the industry about the longevity of availability of insurance,” Beaumont told The Australian Financial Review. “You’re fighting tooth and nail to get renewals done, just for every renewal. And the costs and excesses… are not sustainable for many businesses.”
Last year’s PwC research showed that PI cover in Australia’s construction industry is loss-making, with the sector having been unprofitable since 2011 and having paid out nearly $3.43 in claims for every $1 in premiums in 2017.
One solution suggested by building surveyors was for all building industry players – including builders – to face compulsory registrations and hold compulsory PI insurance, in order to raise the pool of premiums and spread the risk of claims across all players.
Beaumont said HDI Speciality had opted to not renew its binder relationship rather than stay and offer policies with exclusions, as he noted that cover without cladding exclusions “hasn’t been available since the first of July last year anyway.”
Brett Mace, of the Australian Institute of Building Surveyors, said that with the “latest white knight” galloping away from the market, the current “unsatisfactory” and “not sustainable” PI insurance model “is yet another step closer to collapse.”
“Governments can no longer continue to ignore the warning signs of the last two to three years,” Mace said.
To reduce the enormous risk borne by surveyors and certifiers, the Insurance Council of Australia said there needs to be a change in legislation and regulations across Australia.
“The federal government must implement the Shergold-Weir [report’s] recommendations as a matter of urgency,” Karl Sullivan, the council’s head of risk and operations, told AFR.
In a statement issued to Insurance Business, HDI noted that it is “not pulling out of the PI business in Australia” and that it “remains committed to writing PI Insurance and D&O Insurance in the Australian market, using its locally based team of financial lines underwriters.”
