A leading provider of liability insurance to the New Zealand building industry is urging all sub-contractors to make sure they have payment protection insurance in place in the wake of the Mainzeal collapse.
Builtin New Zealand provides tailored liability cover to firms operating in New Zealand’s construction sector, including the industry’s first sub-contractors payment guarantee policy. Available to small and medium sized firms, it protects sub-contractors from payment default by their main contractor if they go bust.
Builtin Director Jim Rickard says “we created our payment guarantee policy in the wake of the collapse of Hartner in 2001, which sent many of their sub-contractors to the wall. While big companies can get trade credit insurance, it’s the small and medium sized firms that often can’t recover if they’re not paid for what can be weeks and even months of work.”
“One client of ours claimed $100,000 on their payment guarantee insurance to offset their losses to Mainzeal. For some subcontractors that could be the difference between staying afloat and having to shut their own doors.”
The construction industry in New Zealand is highly fragmented, comprising thousands of “one man bands”, small family firms and relatively few larger suppliers. “Unfortunately, many small firms look at liability insurance as an unnecessary expense, rather than a cost of doing business, which can help them overcome big shocks to their business, like the liquidation of a major customer.”
The Mainzeal collapse is expected to cost sub-contractors tens of millions of dollars and could create a ripple effect throughout the industry, as unpaid firms default on their own payments.