Ongoing deferral of insurance requirements buys time for builders still searching for cover

In 2020, the Design and Building Practitioners Act 2020 (NSW) (DBP Act) introduced a requirement for registered practitioners to be "adequately" insured for the work they are required to do under the compliance declaration regime that was established by the Act. This is broadly understood to mean that both builders and designers need professional indemnity (PI) cover.

When the Design and Building Practitioners Regulation 2021 (NSW) was introduced in 2021, the insurance requirements for all practitioners were deferred for 12 months, because the NSW Government acknowledged that there were insufficient products available in the market at that time.

The insurance requirement for design practitioners came into effect in mid-2022, however the requirement for building practitioners has continued to be deferred each year. In June 2026, Building Commission NSW announced a further 12-month deferral of the requirement for building practitioners to 1 July 2027.

It now appears the insurance requirement for building practitioners may not come into effect for another few years. In August, the Minns Government introduced the Fair Trading and Building Legislation Amendment Bill 2026 (Bill) which proposes to remove the current 12-month limit for further exemptions for insurance requirements for building practitioners. This is reportedly to provide certainty to industry that building practitioners will continue to be exempt from the insurance requirement for as long as it takes the insurance market to develop a product that meets the necessary legislative requirements. The Bill also seeks to amend legislation to enable the approval and operation of a decennial liability insurance, the progress of which has been slow moving.

A challenging market?

The most recent deferral suggests that the insurance market remains challenging for building practitioners to obtain PI insurance to satisfy the requirements of the DBP legislation.

In our view, however, this is unlikely to be the case. The Australian construction PI market has been slowly improving following the hardening phase that followed the Pafburn decision and other issues negatively affecting claims trends. While some insurers understandably remain concerned about certain types of projects, particularly high-rise residential design and construct, our recent discussions with brokers suggest that PI cover is broadly available to building practitioners of all sizes, with even smaller builders now commonly required by head contractors or principals to take out PI insurance, irrespective of the DBP legislation.

We can hypothesise that the underlying reason for the ongoing deferral of the insurance requirement for building practitioners may therefore be to allow time to address broader issues with the growing cost of insurance for construction practitioners. This may ultimately be driven by the need to increase NSW's housing supply and remove any impediments, which may include the requirement to have PI insurance. The extent of criticism received since the initial regulations were released may also be a factor.

Some brokers have also flagged the disconnect between the scope of the legislation, which is broad and includes industry trades such as painters and bricklayers, and the cover provided by traditional PI insurers, which generally only provide cover for "professional services". It has been suggested that the implications of the DBP legislation have not been communicated effectively to the SME construction market, meaning the majority of contractors are likely unaware that they are captured by the legislation and have this exposure.

Other deferrals

Two additional reforms under the DBP legislation have also been announced as deferred:

• Expansion of the DBP Act to remedial work on class 3 and 9c buildings: The current exclusion of repair and remedial work undertaken on class 3 and 9c buildings from the registration and compliance obligations under the DBP legislation has been extended to 1 July 2028. This deferral does not affect the statutory duty of care under section 37 of the DBP Act, which applies to construction work on all classes of building.
• Strata building bond rate increase: The increase to the strata building bond under the Strata Schemes Management Act 2015 (NSW) from 2% to 3% of the contract price has also been deferred until 1 July 2028.