NSW has passed the legal framework for Latent Defects Insurance, but no product has yet cleared final regulatory approval. Advisers with developer clients do not need to wait for that approval before starting the conversation - because DLI cover only has to attach once a building is completed, not when a policy first clears sign-off. That leaves a preparation window open right now, regardless of how the approval race plays out.
The Fair Trading and Building Legislation Amendment Bill 2026 runs across 20 pieces of legislation, but one clause changes what any future DLI conversation with a client will actually cover.
Buried in an amendment to the Strata Schemes Management Act 2015, section 211AA now holds a fresh definition of "relevant defect", replacing the "serious defect" test that has governed strata claims for years.
The new definition splits into four distinct triggers rather than one general standard. A building element that falls short of the Building Code of Australia, relevant Australian Standards, or approved plans qualifies where the failure causes damage or a risk of death or serious injury.
Defective design, workmanship or materials qualify where the result is a building that cannot be lived in, is destroyed, or faces a real threat of collapse.
Unlawful use of a building product under the Building Products (Safety) Act 2017 is captured, alongside a new category covering "vertical transportation products" - meaning lifts, escalators, moving walkways and parking systems - where a fault carries a risk of death or serious injury.
Regulations can add further categories later, so this list is not necessarily final.
Advisers relying on any single source for a launch date should treat that date with caution. Ryan Specialty Latent Defects has been seeking Building Commission NSW approval since 2023 and is reportedly resubmitting its policy in response to the definition change, having stated that "no approvals are currently imminent" in NSW or Victoria and that it will wait for unconditional sign-off before launching.
Resilience Insurance chief executive Corey Nugent takes the opposite view, saying he expects one or more products to clear approval soon and attributing the delay to parliamentary scheduling rather than any gap in what is on offer.
That disagreement between the two firms most active in this space is itself useful market intelligence. The approval timeline a client hears from one insurer may not match what a competitor is telling the market.
There is also a governance detail worth knowing before repeating any single insurer's framing of the reform as neutral fact. Resilience sat on the NSW Government's Ministerial Advisory Panel that helped shape this scheme - chaired by former Insurance Council of Australia president Gary Dransfield - while simultaneously being the only firm reportedly selling a DLI-equivalent product in Australia. Asked whether that amounted to a conflict of interest, Nugent has pointed to the panel's mixed composition of consumer groups, strata bodies, lawyers and rival insurers, and maintained his firm held no more influence over the outcome than anyone else at the table.
Cover is designed to sit with the building rather than the owner, running up to 10 years and transferring automatically if the apartment changes hands. Claims are first-party and no-fault, meaning an owner claims straight from the insurer without needing to establish who is at fault first.
The scale of what this is meant to address is set out in the 2025 Strata Defects Research Report, produced by Building Commission NSW with the Strata Community Association NSW and released in April 2026, which found 53% of strata buildings surveyed had serious defects - waterproofing the most common at 22% and fire safety systems at 16%.
Victoria's own Building Legislation and Treasury Legislation (Tax Relief) Amendment Bill 2026 would require developers of buildings four storeys or taller to arrange 10-year decennial cover before an occupancy permit is granted, with the Building and Plumbing Commission handling approvals and able to compel developers and insurers to supply policy information.
Unlike NSW's current framework, Victoria's bill leaves room for regulations establishing a standard dispute resolution process where a claim is refused - a gap NSW has not yet closed.
