icare HBCF Premium Changes effective 1 August 2019

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Dear clients,

As announced during 2017, reforms to the Home Building Compensation insurance scheme have been implemented to ensure that the fund regains financial stability so it can continue to protect NSW homeowners now and into the future.

Following a premium filing submission to the State Insurance Regulatory Authority (SIRA), a premium rate change will come into effect on 1 August 2019 for most dwelling types.
Letters to builders advising of new premium rates will not be prepared by HBCF. Given the extended notice period, distributors are requested to communicate these changes in base premiums. We will update our website on 3 April 2019.

Please note risk based premium weightings may change between now and 1 August 2019, if there is a completed assessment because of programmed eligibility review or builder profile change. Any changes in premium weightings will be communicated in the usual manner by Corporate Scorecard.

There will be no ‘grace period’ for policies not issued by 1 August 2019.

Key features of the premium changes

Premium rates have been adjusted to reflect the latest assessment of breakeven premium rates for all construction types.

Multi-dwelling construction types will move to break-even premium rates in four rate increases across FY20 and FY21 to alleviate the impact to building activities.

Align premiums for New Duplex/Triplex construction type with the New Single Dwelling premium rate. Existing pricing is to remain until 1 August 2019.

The risk- based rating structure used to determine builder risk factors is unchanged.

The minimum premium of $200 plus statutory changes, stamp duty and GST remains unchanged.

How much are the premiums changing by?
The changes vary depending on construction type. The below table sets out the changes, if any, for each type except for multi- dwellings which will be shown in a different table. Please note that there are no premium increases for 74% of the fund’s portfolio. In fact some reductions are substantial such as New Duplexes, Dual Occupancy, Triplex &/or Terrace (attached) Construction which will be reducing by 62% from 1 August 2019.

Why have the premium rates for new duplexes, dual occupancies etc. being aligned with new single dwellings?

We have listened to builder feedback on the risks associated with duplexes compared with new single dwellings and decided to align the premiums.

What about the increases for Multi-unit categories?

The October 2018 premium increases excluded multi- dwelling construction types to allow for further consideration and analysis. Multi-dwelling construction types (C02, C03 & C08) will move towards breakeven premium rates in four rate increases across 2019/20 and 2020/21 to alleviate the impact to building activities.

Multi-dwelling represent only 12 % of the fund’s portfolio.

The following table shows the premium increases for multi-dwelling constructions which will occur in 4 tranches/stages

What size are the increases?