Building guarantees up in the air

Would-be new home owners have been left with fewer options for protecting themselves, after two key building guarantees lost their overseas backer.

Stamford Insurance’s 10-year new build guarantee and New Zealand Certified Builders’ Halo 10-year guarantee have both lost their underwriter, a subsidiary of Lloyds of London which has pulled out of the market globally.

Stamford’s coverage ran out on December 31 and Certified Builders’ ends on January 31.

Both organisations stressed existing policies would still be honoured but new guarantees could not be offered in the meantime. Jason McClintock, Certified Builders’ group technical manager, said it certainly left a gap in the industry.

‘‘The insurance scene globally has shifted and I think that has triggered Lloyds to look at what business they do where.’’

Certified Builders, which accounts for about a third of the country’s builders, requires its

members to supply the Halo warranty for all new builds and substantial alterations.

Without it, McClintock said, consumers had few options and it raised the long-discussed question of whether the Government should bring in an industry-wide, mandatory warranty.

‘‘The Ministry for Business, Innovation and Employment, as part of its proposed building reforms, which are very much open for negotiation, had actually entertained making guarantees mandatory, so we do need to fill this hole to better protect New Zealand consumers.’’

A ministry spokesperson said the mandatory warranty idea was ‘‘still under active consideration’’ as part of its wider work ‘‘and we expect decisions later this year’’.

Stamford’s chief executive, Duncan Colebrook, said he had a replacement underwriter on the horizon. However, they were not registered in New Zealand and he was trying to find an insurer here which would become the local representative. Colebrook said a mandatory warranty had worked well in other countries and would be ‘‘desirable’’ here.

‘‘The problem with New Zealand is, it is a very small market.’’

Potential new entrants also had to overlook New Zealand’s history of leaky buildings and past problems with Australia.

McClintock said Certified Builders had found luring a new insurer here to be a ‘‘significant undertaking’’. It had contacted 22 potential insurers in five countries since being given notice by Lloyds.

The only other options for home owners at present were inhouse guarantees offered by certain group builders and the Master Builders guarantee which was offered by a subsidiary, he said.

Halo was launched three years ago, and by May last year was covering more than 13,000 housing builds or renovations, offering more than $5 billion in coverage.

‘‘The insurance scene globally has shifted.’’ Jason McClintock

Certified Builders