Building Code Requirements vs. Property Insurance Requirements

• Different Goals
  A property insurance policy covers financial risks associated with owning a building. If a building material is safe to use but costly to repair, this may concern an insurance company more than it concerns the Australian Building Codes Board (ABCB.)

• Different Risk Appetites
  Risks deemed acceptable by the ABCB are not always acceptable to insurers.

• Different Response Times
  Information about the safety of building materials is always changing. A government body like the ABCB cannot always adapt as fast as a private insurance company.

This, coupled with the already hardening insurance market, has created a difficult environment for building owners. A hard market is defined by reduced capacity and higher prices. In a hard market, insurers are less willing to compete against each other for business.

• Risk-averse insurers
• Stricter rules for issuing new policies
• Fewer options
• Higher premiums
• Higher excesses

Insurers and Australian state governments reacted differently to this news. NSW enacted a ban on ACP products that are more than 30% polyethylene. Insurers were much harsher:

• Buildings with ACP cladding became difficult to insure and the cost of covering buildings with ACP skyrocketed.
• Building codes can allow some ACP products with small amounts of polyethylene, but many insurers take a stricter approach by refusing to insure buildings with ACP containing any amount of polyethylene, classifying it as “flammable”
• Insurers have begun restricting coverage and increasing prices for other highly-combustible code-compliant building materials too. This includes Expanded Polystyrene Cladding (EPS) and Timber cladding.

If you plan to build, renovate, or refurbish a premises: an insurance broker can tell you how different building materials affect insurance cover. This may not change your mind, but it will mean you understand the implications of your decision and are prepared at renewal time.

• To be kept in the loop about market changes.
• To get expert help sourcing cover for difficult to insure buildings.
• To get the information you need to make informed decisions around your building and renovation projects.