A new product class is entering the Australian insurance market. Brokers with developer clients have a window to prepare before demand arrives.
The defect data on NSW apartment buildings is unambiguous. The 2025 Strata Defects Research Report – conducted by Building Commission NSW in partnership with the Strata Community Association NSW (SCA NSW) and published in April 2026 – found that 53% of strata buildings surveyed had serious defects, consistent with the 2023 findings, with waterproofing the most prevalent issue at 22% of buildings surveyed, followed by fire safety systems at 16%. Newer buildings registered between 2022 and 2024 showed lower defect rates than those registered between 2018 and 2021, suggesting reforms are having some effect on new stock. That residual exposure – concentrated in existing buildings, still present across newer stock – is precisely the gap that Decennial Liability Insurance (DLI) is structured to address.
DLI is a strict liability product designed as insurance of first resort for apartment owners. Cover is triggered by the identification of a covered defect, without requiring owners to first prove negligence or establish fault through litigation. The policy provides 10 years of protection for covered defects in common property from when the building is completed, with the cover remaining in place even if the developer or builder becomes insolvent. Rather than relying on the ongoing financial position of the parties responsible for construction, the insurance provides protection for the owners corporation and subsequent owners during the policy period. DLI covers critical building elements in common property – structure, waterproofing, and fire safety systems – providing cover up to the full construction cost value of the building works.
That represents a different approach to the existing Strata Building Bond and Inspections Scheme (SBBIS). Under the SBBIS, developers provide a building bond calculated as 2% of the total cost of building contracts, with interim inspections generally occurring 15 to 18 months after completion and final inspections between 21 and 24 months after completion. DLI takes a different approach by providing 10 years of strict liability insurance protection for covered defects, allowing owners to seek remediation without first establishing fault. The shift represents a broader transfer of long-term defect risk from developers and owners to insurers.
The NSW government passed the Fair Trading and Building Legislation Amendment Bill 2026, which clarified aspects of the regulatory framework governing DLI. The changes are expected to support Building Commission NSW’s assessment of DLI policies submitted by insurers seeking approval. The legislation forms part of NSW’s broader move toward establishing DLI as an alternative pathway to the existing SBBIS. NSW Building Commissioner James Sherrard confirmed the Commission had been engaged with multiple insurers ahead of the Bill’s passage. “Building Commission NSW has been working diligently with multiple insurers and the passage of this legislation allows us to undertake the final assessments required so they can hit the market,” he said.
Resilience Insurance, whose offering is called Latent Defects Insurance (LDI), claims to be Australia’s first provider of such cover. The company launched its LDI product in 2022, describing it as a first-resort policy providing 10 years of protection for structural and waterproofing defects after construction completion. A second underwriter is in the queue. Ryan Specialty Latent Defects, part of Ryan Specialty Underwriting Managers (RSUM), has been seeking Building Commission NSW approval since 2023 and, following the legislative shift from “serious defects” to “relevant defects,” stated in a LinkedIn post that “no approvals are currently imminent” in either state, adding that it would only launch once unconditional regulatory approval was secured.
Resilience CEO Corey Nugent disputes that assessment. He told Insurance Business he is confident that one or more products are close to approval in NSW, attributing the delay to parliamentary timing and the enabling regulation rather than to the products themselves. For brokers, the distance between those two positions – imminent versus not imminent – is the single most commercially relevant variable in this market right now.
DLI is currently voluntary in NSW and operates as an alternative to the SBBIS. The NSW government’s recommended reform option would transition the market towards mandatory DLI for new Class 2 buildings and buildings with a Class 2 component after a transitional period, with SBBIS remaining available during that transition. Under the proposed model, DLI would become the mandatory pathway once the transition period is complete. The change would represent a significant shift in how covered defect risks are managed, moving more of the financial exposure from apartment owners and developers towards the insurance sector. For insurers and brokers, the introduction of mandatory DLI would create a new construction risk market, requiring closer attention to underwriting requirements, policy structures, and client advice.
Victoria is moving in a similar direction. Victoria passed the Building Legislation and Treasury Legislation (Tax Relief) Amendment Act 2026, which introduced reforms relating to decennial insurance for apartment buildings. The remaining provisions of the Act are scheduled to commence no later than December 1, 2027. Together, the reforms in NSW and Victoria suggest that decennial-style defect insurance could become a more significant feature of the risk transfer landscape for Australia’s apartment construction sector
Resilience’s Nugent told Insurance Business that brokers advising developers and construction clients can begin educating those clients now, noting that government approval is only needed before buildings complete – meaning the preparation window is open regardless of whether formal product approval has landed. Developers, builders, consultants, and insurers must begin adapting by refining documentation, strengthening governance, and understanding how DLI policies will interact with existing insurance programmes. For brokers, that means building familiarity with the product’s mechanics, tracking the approval timeline, and identifying which carriers are entering the market – before developer clients start asking. With more than 75,000 homes under construction in NSW and a government-backed transition towards mandatory DLI, brokers servicing residential construction clients will need to understand how the emerging product could reshape defect risk management.
