What does this mean for the insurance industry?

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Honan has started seeing a shift in approach from Insurers: they have started requesting additional information in relation to cladding and EPS. Longitude Strata Insurance has taken a formal stance and advised all their stakeholders that they will no longer quote properties with more than 25% EPS construction. Furthermore any properties that they are insuring which fall within this category will be declined upon renewal.

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Although disclosure of information and declines are nothing new to our industry, the strong stance taken by the Insurers demonstrates their aversion toward such materials.

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According to InsuranceNews, the Insurance Council of Australia (ICA) has put forward a suggestion for a nationwide audit on cladding as they are doubtful Insurers will be willing to pay out claims on non-compliant buildings. Allianz has moved towards this and has started to put exclusions on their Professional Indemnity products for Strata Managers, stating that they will no longer indemnify for claims arising directly or indirectly out of any building cladding that is not compliant. At Honan we do not believe this is an isolated incident, we believe the market is likely follow.

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Are you concerned your property is non-compliant? We suggest taking the following steps:

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• Inspect your property, strata plans, council records, certificate of occupancy and any relevant documents available for any possible aluminium cladding and EPS
• Advise concerns to any immediate interested parties such as Building Managers, Real Estate Agent, Strata Managers or your Executive Committee
• Obtain a report from qualified experts which highlights the amount of cladding and their fire resistance properties
• Update the relevant parties of the findings e.g. Real Estate Agents, Strata Managers, Building Managers and most importantly your Insurer
• If your property has been recently built, you will need to notify the builder's home warranty Insurer and possibly the developer
• Obtain legal advice and expert opinion on the topics of liability, sustainability of materials and who is liable for the cost of repair and replacement of your property
• Arrange quotes and scope of works for the repair and/or replacement of these materials
• Raise levies, complete works and update your Insurers