Concern over CBL-backed guarantees

Thousands of recently built New Zealand homes are covered for shoddy building work under guarantees backed by CBL Insurance, which was put into interim liquidation on Friday.

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

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

Thousands of homes built in the past decade remain covered by the 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 fixing emerged, it was often early in the existence of a new home.

Builtin Insurance provided the Homefirst Builders Guarantee to certified builders, but also sold the product independently to builders.

Its website showed it was still being sold yesterday, and that it was still backed by CBL Insurance.

Builtin Insurance director Jim Rickard said he had tried to contact interim liquidator McGrathNicol without success. He was trying to confirm that the guarantees issued would be honoured for the remainder of their cover periods, should any of the covered homes need fixing.

Builtin had worked with CBL Insurance for many years, he said, partly based on its strong credit rating. Last year, CBL Insurance got a credit rating upgrade, and things looked good.

‘‘We had no reason to have any concerns at all,’’ Rickard said.

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. On the same day, CBL Insurance was placed into interim liquidation by the High Court in Auckland.

Liquidator Kare Johnstone from McGrathNicol said ‘‘a thorough assessment’’ of the company would be conducted to evaluate all options to take the company forward. Johnstone was not available for further comment.

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 including in France, the United Kingdom, Australia and Ireland.

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

CBL said the review was sparked in July when Gibraltarbased Elite Insurance, which it had been working with since 2009, stopping writing new business.

In its 2016 annual report, CBL said much of its European business had been ‘‘written through, and shared’’ with Elite.