From Niche to Mainstream: LDI Shake-Up Reshapes Developer Insurance Landscape

Rule changes are afoot in two states that would change the way developers approach building defects insurance. Late last month, the second hearing of a bill amendment in New South Wales placed better definitions on defects and widened what decennial liability insurance (also known as latent defects insurance) can cover. Earlier in the month, the Victorian Lower House passed the Building Legislation and Treasury Legislation (Tax Relief) Amendment Bill 2026, creating a decennial liability (DLI) scheme as an alternative, alongside developer bonds, for residential apartment buildings compared to strata bonds. While the Bill has yet to complete its passage through the Victorian legislative council, it marks a seismic shift for Victoria’s developers, accoridng to Resilience Insurance chief executive Corey Nugent. “The Victorian Lower House vote shows that reforms like this succeed when they are practical, evidence-based and supported by industry. Victoria is moving quickly on a reform that will make a real difference for apartment buyers,” Nugent says. NSW, Vic lead the way on LDI New South Wales is the heartland of LDI. It is home to the highest number of developments already covered by the insurance after NSW developers sought to demonstrate their trustworthiness in the wake of the Opal Towers scandal and other high-profile building failures prompted a crackdown from the Building Commissioner. NSW is proposing the Fair Trade and Building Amendment Bill 2026, which scraps the “serious defects” label and replaces it with a new, wider-ranging “relevant defects” definition. As such, the substance of what decennial insurance covers is being broadened and clarified. ▲ Resilience chief executive Corey Nugent: Victoria is moving quickly on a reform that will make a real difference for apartment buyers. It defines a defect as one that breaches the Building Code of Australia, relevant Australian standards or approved plans, and causes, or is likely to cause, damage to the building or risk of death or serious injury. The bill amendment was introduced in January 2026, and passed by the legislative assembly in February 2026, before moving onto the legislative council. It received a second reading in June 2025 in a meeting which overran, and was booted to the July council meeting. “They’ve reworded, reordered and in fact, in one area, probably expanded what was included in that cover. But it now is quite clear and insurers are able to say, yes, we can price the risk of that and insure it,” Nugent says. While the details of the amendment bill are largely about semantics, it, and its Victorian counterpart, show that legislators are serious about pushing for the increased adoption of LDI. ▲ Urban Property Group was the first to take out LDI on a project and has committed to it for its 5000-home pipeline, including its Central Coast Quarter. “It is validation and momentum in terms of moving this forward,” Nugent says. “The NSW government has been pushing a case of industry reform for what is now seven or eight years, and we’re not seeing a drop off in the Building Commissioner’s push to ensure quality and transparency across the construction and building industry. “The message is that this is not something that’s disappearing, the government is now regulating further to improve what that scheme is and develop it.” In fact, the NSW government has stated its intention for decennial liability insurance to become mandatory, even as early as 2028, although a Ministerial Advisory Panel is still to decide on whether to make DLI mandatory (its preferred model) or increase the current strata building bond scheme to 5 per cent from 2 per cent, and leave LDI/DLI as a voluntary addition. LDI in a maturing buyer market At approximately 1.8 per cent of the build cost, Nugent says, it is a cost-competitive alternative to the traditional bond. “But there are developers in an inertia position with strata bonds of, whether we like it or we don’t, we know it, so we’ll continue to do that,” Nugent says. While the market continues to mature, some major developers are taking it up with gusto. ▲ Early adopter Haitchin Group joined the LDI push with its Infinity Park development at Norwest, which began construction in 2023. Urban Property Group general manager Nick Gaudry said Urban was the first in Australia to commit to the insurance, with its The Parq project at Bexley, and was committed to LDI for its pipeline of 5000 build-to-sell apartments. “In an environment where we’re competing against another development down the road, if a buyer has a choice between one of our developments and development that doesn’t have LDI insurance, they’re certainly going to look at us more favorably,” Gaudry says. LDI continues to gain recognition from the buyer side too, he says. The original Bexley buyers required some education on LDI, but by the second and third developments, Gaudry says, buyers were much more knowledgeable. ▲ Urban Property Group followed its Bexley project with Le Vera at Macquarie Park being covered by LDI. “LDI has an inference that we’re building quality buildings, as the insurance is very specific to the building,” Gaudry says. And the process of obtaining LDI, which requires rigorous, regular assessment and on-site visits from independent auditors provides that certainty, Gaudry says. “Others may still see [LDI costs] as a hurdle, given there’s already a significant number of costs to get a development started. “But also see the benefit from the independent audit process, which we have adopted on our built-to-rent projects [another 4000 apartments], even though it’s not required. “So not only do we have an interest in the quality assurance process it offers, but we think that long-term, there will be a shift towards mandating LDI.”

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Clare Burnett
Fri 03 Jul 26

From Niche to Mainstream: LDI Shake-Up Reshapes Developer Insurance Landscape

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