BTR Protect

Australia continues to grapple with housing affordability and supply, and while the build-to-rent (BTR) market is growing, it still represents a fraction of residential housing. With federal and state governments now providing incentives, this will stimulate the influx of capital into the sector and result in a significant uptick in BTR that will be vital in helping achieve housing targets.

But there are implications for insurance coverage because BTR differs from the traditional build-to-sell model. Residences are designed and constructed with the specific purpose of being rented rather than sold to individuals, with the developer retaining ownership, and managing and maintaining the buildings – sometimes with the participation of an investment fund, or pool of investors.

Why is the insurance landscape different?

BTR developments are retained by the developer, placing them outside of strata regulation under the various state-based registration schemes. The BTR model has different insurance requirements, exposures, and vested interests. Some of the issues you need to consider include:

• Construction delays having a direct impact on forward rental income for the developer
• Rental losses during operational phase can be significant as the developer owns and operates the entire building
• The developer has a financial interest from construction through to and including the operational phase
• Handover from construction to the operational phase may not be traditional and incorporate early occupation or handover, or a staged handover.

What is BTR Protect?

WTW has developed BTR Protect, an Australian-first “all of life” solution, with a flexible model to ensure the various components of the development are covered, with optional extensions available. This is a holistic insurance program for BTR developers, owners and operators which can include:

• Contract Works/Property Cover – physical damage to property under construction and subsequent operational phase use, including contents
• Existing Property – where a development includes an existing structure
• Advanced Consequential Loss – loss of future insurable revenue, fixed costs or debt servicing costs should the project be delayed by an insured peril including claims preparation costs and cost to reduce interruption losses
• Accidental Damage, Burglary and Fire losses once the building is complete
• Liability – third party property damage or personal injury arising out of the construction and occupation of the building
• Loss of Rent – costs incurred to abate rent during any period of disruption, reletting costs following insured damage including machinery breakdown
• Machinery Breakdown – breakdown cover for specified items of machinery.

BTR Protect turnkey solution

Our BTR Protect turnkey solution is a whole of life cycle which benefits developers / investors, operators and tenants. Phases of this cycle include construction, transition to operational, operational, renter value adds and service commitment.

BTR Protect turnkey solution

How does the BTR Protect insurance model work?

The Build to Rent - Developer / Owner / Operator model has four key stages. These include under construction, pre-leasing, staged handover and fully operational.

Insurance program design

Why should you use BTR Protect?

BTR Protect offers significant benefits to your insurance program.

• Greater control – The developer owns the insurance during construction, handover and operational phase under one policy
• Certainty of insurance cost – this end-to-end solution offers full transparency on cost
• Remains in place for duration – Avoid potential gaps during handover phase where separate construction and operational insurance policies have different terms. No demarcation issues during handover and the defects liability period.
• Contractor change or insolvency – Your insurance will not be impacted by such changes. It remains in place with no gaps and no duplication of insurance costs passed on by a change of contractor
• Loss of rent – You can cover this during construction and once operational
• Risk engineering services – Provided at construction stage to reduce any retro fitting costs arising from insurer recommendations post construction. They can be resolved upfront
• WTW partner insurer market appetite – Our insurer partners understand that BTR Protect is a better product and are quoting insurance costs accordingly.

BTR Protect - The key benefits

Key benefits for the developer / investor

• Cost control, certainty and transparency
• Contractor insolvency or default protection
• Ease of transition from construction to operational insurance
• Tailored policy coverage
• Security and continuity of insurers
• Claims control
• Understand flood risk

Key benefits for the operator

• Fit for purpose insurance program
• Value add offering to entice prospective tenants
• Potential ancillary income stream
• Pre-build risk engineering to mitigate insurer requirements/cost

Key benefits for the tenant

• Cost effective insurance offering
• One-stop shop for advice