The proposed amendments to the Building Amendment Bill introduced to Parliament on 29 June 2026 will impose important new obligations and risks upon the New Zealand building industry.
At the time of its introduction, we published an article examining the shift to proportionate liability for defective building work. In short, this will make each liable party responsible for only its respective proportion of the loss. This is an important change, as parties that jointly cause a building and construction loss presently bear joint and several liability, so liability falls disproportionately upon parties that remain solvent when a claim is made.
As part of this reform, the Bill introduces new mandatory residential home warranties and professional indemnity insurance requirements.
Attention has turned to a question the Bill has left unanswered – whether New Zealand’s insurance industry is positioned to deliver the cover upon which this reform depends. The adequacy, pricing, and availability of the necessary insurance will determine the success of this reform.
Two new compulsory insurance obligations
The Bill introduces two distinct mandatory insurance obligations to counteract the increased risk that proportionate liability creates for claimants, who may no longer be able to recover in full if a liable party is absent or insolvent:
- mandatory residential home warranties for residential building work with a total value of NZD100,000 or more (including GST), where the work involves restricted building work and requires a building consent. The warranty must provide minimum coverage of at least one year for defective building work and ten years for structural defects; and
- mandatory professional indemnity insurance for design consultants, being those who contribute through advice or other services to the design or compliance of building work, such as architects, designers, engineers, and surveyors. This obligation applies where the total price of the building work is NZD100,000 or more (including GST)[1].
These two obligations serve different purposes:
- The residential warranty gives homeowners direct, enforceable protection against the liable party if defects emerge (provided it remains solvent).
- Professional indemnity insurance will be available to pay claims, although it will respond only to a consultant’s own contribution to a defect, consistent with proportionate liability’s focus on aligning each party’s exposure with its actual share of responsibility.
Providers of these products must register with Ministry of Business, Innovation and Employment (MBIE), with strict penalties for non-compliance. This adds a new layer of regulatory oversight for insurers and warranty providers operating in New Zealand, on top of the underwriting risk itself, and is a further factor bearing on whether the market can meet demand at the scale the Bill now requires.
The mandatory home warranty regime is not universal. Larger apartment buildings, where defects can be more costly, fall outside the mandatory scheme. Affected owners may be left without the direct, insurer-backed protection the reform is designed to cover, at a time when the shift to proportionate liability increases the risk of under-recovery.
Can the market deliver this cover?
The insurance market upon which the Bill relies is not deep at present. Only around 46% of new builds carry warranties or insurance today, and the largest existing schemes, Master Builders and Certified Builders, are limited in cover and are self funded rather than insurance backed [2].
Global insurers have historically approached the New Zealand building sector with caution. Stamford Insurance, currently the only true insurance-backed warranty product available, has already exited and re-entered New Zealand once before. The Insurance Council of New Zealand warned MBIE as far back as 2019 that this concentration could not be assumed to persist, given that this kind of market is sensitive to claims performance, financial market conditions, and regulatory change both in New Zealand and globally [3].
Mandating cover across the sector is intended to change this dynamic by guaranteeing demand at a scale the voluntary market has not offered.
Mixed signals from the market
Whether guaranteed demand alone is enough to draw more providers into New Zealand remains unclear. MBIE has indicated that it has received informal approaches from underwriters based in Australia, London, and Paris, describing this as a positive sign of increased competition ahead of the mandate taking effect [4].
However, the industry’s more cautious voices point to structural features of the New Zealand market that guaranteed demand does not resolve. Stamford’s founder has said that the insurance industry lacks the appetite to offer blanket cover and that Stamford applies a careful, selective underwriting process to every builder it insures, rather than relaxing standards to meet increased volume. New Zealand’s two dominant general insurers do not currently offer specialised building warranty products, underlining the extent of the challenge [5].
For insurers and warranty providers, the Bill represents both an opportunity and a test.
A safety valve: The disapplication power
Recognising this uncertainty, the Bill includes a power for the Governor-General to temporarily disapply some or all the home warranty and professional indemnity insurance requirements. This power may only be exercised where there is a material impact on the availability or affordability of these products, such as a major market disruption or an insurer withdrawal, and a resulting risk to building sector continuity or housing delivery.
The inclusion of this power is an acknowledgment that the Government cannot compel private insurers to underwrite this risk, and that the reform’s consumer protection framework is only as strong as the market’s willingness to carry it. This offers some comfort that mandatory cover will not be required if the market cannot supply it. However, it also introduces a further layer of regulatory uncertainty for any new entrant weighing up a long-term commitment to the New Zealand market, since the very demand a mandate is meant to guarantee could be suspended if that market proves unable to meet it.
What this means for insurers, warranty providers, and consumers
For insurers and warranty providers, the Bill represents both an opportunity and a test. The prospect of guaranteed demand for qualifying residential building work is a strong incentive for the insurance industry. However, providers will need to satisfy MBIE’s registration criteria and price for a ten-year coverage of structural risk in a jurisdiction with a history of costly systemic defects.
For consumers, the practical value of the reform will depend heavily on how the regulatory and industry dynamics resolve. A market with genuine competition and capacity would deliver on the Bill’s promise of independent, enforceable protection. A market that remains thin would leave the consumer protection framework looking stronger on paper than in practice.
What’s next?
The Bill is currently in the Select Committee stage and the detail of the registration criteria and minimum policy requirements are yet to be developed.
How the market responds in the lead-up to the regime taking effect will determine whether mandatory insurance delivers the consumer protection the reform is designed to provide.
This article was co-authored by Matthew Gould, a Solicitor in our Construction and Infrastructure team.
Footnotes
[1] Building Amendment Bill (332-1) (explanatory note).
[2] Jenée Tibshraeny “Insurers eye entry into New Zealand, as home building warranties/insurance due to become mandatory”. The New Zealand Herald (online ed, Wellington, 29 June 2026).
[3] Jenée Tibshraeny, above n 2.
[4] Jenée Tibshraeny, above n 2.
[5] Jenée Tibshraeny “Jury is out over whether homeowners will be left in the cold under Chris Penk’s building regime overhaul” The New Zealand Herald (online ed, Wellington, 4 September 2025).
