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Legislative Assembly for the ACT: 2002 Week 5 Hansard (9 May) . . Page.. 1392 ..

MR CORBELL (continuing):

The withdrawal of Dexta from the market means that around half of the ACT's builders will no longer have insurance for future work. It currently leaves only one broker, HIA Insurance Services, which provides insurance for the HIA.

Another insurer, Reward, operates on a moderate scale in New South Wales and Victoria, and has recently requested approval to begin operations in the ACT. I welcome their interest, and my department has written to the company about the information they need to provide to enable their application to be considered. However, considering the current volatility of the insurance market, I believe it is still prudent for the government to at least create a framework for a supplementary form of building warranty to meet the needs of the ACT building industry.

The government's objective in presenting this bill is to provide choices in the marketplace with the intention of mitigating the fallout experienced through events such as the HIH collapse, and more recently the withdrawal of Dexta. In consultation with the industry, the government has carefully considered a range of options to address the current crisis. This bill provides for fidelity fund warranty schemes with building warranty protection with the private sector, at arm's length from government. In this instance, the MBA has indicated that it is developing a fidelity fund scheme which will fit within the government's legislative framework.

Mr Speaker, I need to make it clear to members that the government is not in any way underwriting this or any other building warranty scheme. That is the path that was chosen by New South Wales and Victoria until the end of June this year. Mr Speaker, this is not to say that there are no risks at all for the territory government. The fact remains that, in the event of a catastrophic failure of a fidelity fund, or indeed of any existing insurer in the ACT building warranty market, the government would need to consider the impacts on the economy, employment and consumers, and formulate a plan to suit the circumstances. This is a reality that faces governments all around the country. It was a reality that the last government faced when it put in place the HIH rescue package.

This bill seeks to introduce a new approach to building warranty, but because it is not an insurance scheme, a range of safeguards needs to be put in place. In an insurance-based scheme, these safeguards would be imposed by the Commonwealth's Insurance Act 1973 and administered by the Australian Prudential Regulation Authority (APRA). A fidelity fund is not to be subject to the same provisions administered by APRA, and so the bill establishes appropriate prudential safe standards to ensure the transparency and rigour of the fund's operation.

Mr Speaker, I would like to draw to the attention of members the following key features of the scheme provided for in the bill:

It will be required to operate under a trust deed and there are requirements for the content of these deeds;

The fund will need to be managed by a representative board of trustees;

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