Strata Insurance in 2025: The Ongoing Impact of Building Defects and Cladding

Australia’s apartment boom has delivered thousands of new homes across Sydney, Melbourne, and Brisbane. But it’s also left a legacy of defects and compliance failures that continue to haunt strata owners. From cracks in Sydney’s Opal Tower to combustible cladding in Melbourne high-rises, these issues don’t just affect safety—they directly impact strata insurance.

At Clarke Lyons Insurance, we’re seeing firsthand how building defects are shaping premiums, exclusions, and claims outcomes for strata committees in 2025.

The Defects That Won’t Go Away

Building defects have been headline news for years, and unfortunately, the problems are far from over. Common issues include:

• Structural cracks in high-rise towers (Opal Tower, Mascot Towers)

• Waterproofing failures causing long-term damage

• Faulty cladding and fire safety compliance

• Plumbing, electrical, and lift system defects in newer developments

These problems often trigger special levies, costly rectification works, and disputes between owners, developers, and insurers.

High-Profile Cases That Changed the Conversation

• Opal Tower (Sydney, 2018): Cracks forced 300 residents to evacuate. Owners are still navigating legal battles over liability and insurance coverage.

• Mascot Towers (Sydney, 2019): Residents evacuated after severe structural damage was discovered. Owners were left facing a $53m repair bill, with many costs outside their strata insurance.

• Cladding Crisis (National, ongoing): Hundreds of buildings in Melbourne and Sydney have required expensive cladding replacement. Many insurers have either excluded cladding-related claims or imposed huge excesses.

How Defects Affect Strata Insurance

Defects have reshaped the way insurers look at strata risk:

• Higher Premiums: Insurers price in the potential for defects even in well-maintained buildings.

• Exclusions: Policies often exclude cover for latent defects, faulty workmanship, or cladding-related claims.

• Increased Excesses: Even when claims are accepted, excesses for water damage or fire can be much higher than before.

• Reduced Market Competition: Some insurers simply won’t cover high-rise residential buildings with known defect risks.

What Strata Committees Need to Do in 2025

1. Undertake Building Reports Insurers are increasingly asking for engineering or fire safety reports before offering cover. Staying proactive helps avoid refusal of insurance.

2. Address Cladding and Safety Issues Early Rectification works can reduce risk and demonstrate compliance to insurers, helping negotiate fairer terms.

3. Review Sums Insured With construction costs soaring, underinsurance is a major risk—especially in defect-prone buildings where rebuild costs may be higher.

4. Consider Specialist Brokers Navigating exclusions, excesses, and limited market appetite requires an expert who understands both strata law and insurer risk appetite.

   
   

Clarke Lyons Insurance: Your Partner in Strata Risk Management

At Clarke Lyons Insurance, we work closely with strata committees, owners corporations, and managers to:

• Identify risks linked to defects and compliance issues

• Negotiate tailored cover with insurers willing to take on higher-risk buildings

• Advocate for owners during complex claims disputes

• Provide clear guidance on risk management strategies that help control premiums

Final Word

Building defects and cladding issues aren’t going away anytime soon. For strata owners and committees, the challenge is navigating a tough insurance market while protecting property values and residents’ safety.

With Clarke Lyons Insurance by your side, you gain a specialist advocate who understands the complexity of strata risk in 2025—and how to secure the right protection in an environment where every detail matters.