Those building a new home now have fewer options when it comes to getting a guarantee on work.

Would-be new home owners have been left with fewer options for protecting themselves, after two of the country's key building guarantees lost their overseas backer.

Stamford Insurance's 10-year new build guarantee and New Zealand Certified Builders' Halo 10-year guarantee have both lost their underwriter, a subsidiary of Lloyds of London which has pulled out of the market globally.

Stamford's coverage ran out on December 31 and Certified Builders' ends on January 31.

Both organisations stressed that existing policies would still be honoured but new guarantees could not be offered in the meantime.



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​Jason McClintock, Certified Builders' group technical manager, said it certainly left a gap in the industry.

"The insurance scene globally has shifted and I think that has triggered Lloyds to look at re-look at what business they do where."

Certified Builders, which accounts for about a third of the country's builders, requires its members to supply the Halo warranty for all new builds and substantial alterations.

LIBBY WILSON/STUFF The guarantees were both backed by a syndicate of Lloyds of London which is exiting that form of insurance.

Without it, McClintock said consumers had few options and it raised the long-discussed question of whether the Government should bring in an industry-wide, mandatory warranty.

"MBIE, as part of their proposed building reforms, which are very much open for negotiation, had actually entertained making guarantees mandatory, so we do need to fill this hole to better protect New Zealand consumers."

An MBIE spokesperson said the mandatory warranty idea was "still under active consideration" as part of its wider work "and we expect decisions later this year".

JASON DORDAY/STUFF John Gray of the Home Owners and Buyers Association says mandatory warranties have worked well for consumers in Britain.

Stamford's chief executive Duncan Colebrook said he had a replacement underwriter on the horizon.

However, the party was not registered in New Zealand and he was trying to find an insurer here who would become their local representative.

Colebrook said a mandatory warranty had worked well in other countries and would be "desirable" here.

"The problem with New Zealand is, it's a very small market."

Potential new entrants also had to overlook New Zealand's history of leaky buildings and past problems in Australia, he said.

McClintock said Certified Builders had found luring a new insurer here to be a "significant undertaking". It had contacted 22 potential insurers in five countries since being given notice by Lloyds.

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The only other options for home owners at present were in-house guarantees offered by certain group builders and the Master Builders guarantee which was offered by a subsidiary, he said.

Halo was launched three years ago, and by May last year was covering more than 13,000 housing builds or renovation, offering more than $5 billion in coverage.

But in September, the policy hit a snag when the insurer withdrew a portion of Halo's coverage which covered to builders who committed fraud or went bust while the house was under construction.

Research shows that that not all consumers buy a guarantee. A survey by Certified Builders in 2018 found only about 44 per cent of their residential clients had taken one within the last 10 years.

Consumers do have a level of protection under the Building Act and Consumer Guarantees Act, which gives them a 12 month-period to report defects to their builder, and a 10 year "implied warranty" for longer-term problems.

However, home owners without a guarantee take a risk that their builder may go out of business within the 10 years.

MARTIN DE RUYTER/STUFF The idea of a compulsory building warranty has had a lukewarm reception in the past.

Mandatory building warranties are already in place in several countries including Britain. In Australia, state governments filled the gap when insurers pulled out during the global financial crisis.

But it is understood that political appetite for a mandatory warranty in New Zealand has been low, with some concerned it would make the Government an insurer of last resort.

Public consultation carried by MBIE last year was mixed, and an MBIE spokesperson said there were concerns the building insurance market would be able to adequately meet demand.

As a result, the Government has directed MBIE to do more research, including "non-regulatory options".​

John Gray, of HOBANZ, the Home Owners and Buyers Association, said that with a big independent insurer involved, compulsory building warranties had proved a good way of weeding out bad practices and builders in Britain.

He said politicians worried it would end up like the ACC scheme, but it was an important step towards fixing the building industry's tarnished image.

"The consumer harm that is done to people who have enlisted the services of a builder who is less than competent is still ongoing, and the only way we fix that ... is introducing this mandatory warranty scheme and proper vetting of builders and ongoing monitoring."