Decennial Insurance launched in Victoria: key implications for design professionals and insurers

Overview

On May 12, 2026, the Victorian Government introduced the Building Legislation and Treasury Legislation (Tax Relief) Amendment Bill 2026 into Parliament. The Bill includes provisions establishing a Decennial Insurance (DI) scheme for residential apartment buildings, representing a significant development for design professionals and the insurance industry. We set out below the key features of this new insurance product and the implications for design professionals and their insurers.

Reform Context

The DI scheme has been developed in response to serious building defect issues affecting Victorian apartment buildings, including incidents involving defective balconies, widespread waterproofing failures, and significant defects left by collapsed builders. The scheme is intended to strengthen financial protections for apartment owners and improve construction practices. It is a 10-year insurance product designed to provide cover for serious defects in new apartment developments. The scheme appears to align with approach taken in NSW, where a similar DI framework has been more fully developed, with the Victorian Government's goal being to help build a national, affordable market.

Key Features of the Proposed Scheme

The scheme covers "relevant defects" in "relevant building elements" in "residential apartment buildings" of four or more storeys. It applies to common property and some building elements in private lots, such as waterproofing and fire safety systems.

The key features of the new product are as follows:

• The scheme will be voluntary until the decennial insurance market matures. The Government's phased implementation approach contemplates a progression from a voluntary scheme (as an alternative to the developer bond) through to a mandatory scheme once the market matures.
• A person must not apply for an occupancy permit for a residential apartment building unless a DI policy (or a developer bond) has been issued. The policy is then held by the owners corporation for 10 years from the date the occupancy permit is issued. The policy is novated to the owners corporation when the owners corporation is created.
• The policy operates on a no-fault basis. The owners corporation can make a claim when a relevant defect meets the thresholds in the legislation (for example, where it causes damage). Payouts occur only in certain circumstances, and the insurer arranges rectification for accepted claims rather than making cash payments.
• A defect is covered where it is caused by non-compliant work and causes damage to the building and/or a risk of serious injury or death. A defect is also covered where it involves defective design or a defective building product and causes the building to be uninhabitable or poses a threat of collapse. Coverage extends to unsafe building products and defects linked to the installation of a vertical transportation product causing serious injury or death.
• The insurer is subrogated to the rights of the building owner to recover losses. This means that after paying a claim or arranging rectification, the insurer may exercise rights of subrogation to commence proceedings to recover costs from responsible parties.

If the Victorian scheme follows the approach taken in NSW, it is likely to be rolled out in phases. In that jurisdiction, DI was introduced initially as an alternative to the existing developer bond regime, with a transitional period designed to allow the market to mature before any broader reform. If the NSW model is followed, Victoria's scheme may progressively evolve from a voluntary uptake mechanism into a mandatory requirement, at which point it would become a candidate to replace the developer bond scheme entirely.

The Key Take Aways

For design practitioners and their insurers, it is important to note that the definition of "relevant defect" expressly includes defects caused by defective design. This means that design professionals, including architects, engineers, and building designers, face potential exposure under this scheme through insurer subrogation actions. While the policy is held by and provides cover to the owners corporation, insurers who accept claims and arrange rectification will be entitled to pursue recovery against parties responsible for the defect, including designers whose work contributed to the deficiency.

Design professionals should also carefully consider the adequacy of their professional indemnity insurance arrangements given this new subrogation pathway. The 10-year policy period also underscores the importance of maintaining run-off cover for an extended period following project completion.