CBL ‘not in position’ to pay claims

The interim liquidator of CBL Insurance has warned policyholders that it’s not in a position to pay any claims.

The insurer was put into interim liquidation on Friday, creating uncertainty for the owners of thousands of recently built homes that are covered for shoddy building work under 10-year guarantees backed by CBL Insurance.

These include many issued on homes built by the New Zealand Certified Builders trade association.

Interim liquidator Kare Johnstone from McGrathNicol warned: ‘‘CBL Insurance is not currently in a position to make any claim payments to any beneficiaries with a claim made under their insurance policy or bond.

‘‘Insureds and beneficiaries should take appropriate measures to minimise their losses.’’

Any policyholder making a claim will rank as an unsecured creditor claim should CBL not be able to pay its debts in full and enter liquidation, Johnstone said.

She urged people relying on CBL policies to obtain advice from their insurance brokers to determine whether they need to purchase new insurance cover.

‘‘The interim liquidators are currently investigating the business and financial affairs of the company with the purpose of ensuring the best outcome for policyholders and creditors,’’ Johnstone said.

CBL Insurance is a subsidiary of NZX-listed CBL Corporation, which went into voluntary administration as a result of troubles in its French building warranty insurance business.

The company specialised in providing the insurance behind 10-year builders’ guarantees that would cover the cost of fixing faulty work on new homes.

Thousands of Kiwi homes built in the past decade remain covered by CBL-backed 10-year Homefirst Builders Guarantee, but exactly how many were issued is not known at this time.

New Zealand Certified Builders’ members used the CBLbacked 10-year guarantee until it switched to insurance provided by Lloyds of London in 2015, its chief executive Grant Florence said.

All new guarantees were now backed by Lloyds, but those backed by CBL remained in place, though Florence said when claims emerged, it was often early in the existence of a new home.

Builtin Insurance provided the Homefirst Builders Guarantee to Certified Builders, and sold the product independently to builders.

On February 5, CBL announced to the NZX that it needed to find new capital to back its French construction insurance policies ‘‘to take into account potential future claims over the next 10 to 12 years in respect of policies written in previous years’’.

But on Friday, CBL Corporation placed itself in voluntary administration in a bid ‘‘to execute strategies that preserve the CBL group’s various operating units’’, administrator Brendon Gibson from KordaMentha said.

Though not a household name in New Zealand, CBL Corporation was a substantial operation with business in 25 countries, and almost 550 workers, the majority of whom were based overseas.

The February 5 announcement to the NZX followed a four-month review conducted by independent appointed actuary PwC.