Deposit guarantee company Deposit Power is now under external administration following the placement of Auckland-based CBL Insurance into interim liquidation.
External administrators from Chifley Advisory were appointed to the company last week.
Deposit Power acted as an authorised manager and agent of CBL Insurance – which provided all the deposit guarantee bond products sold by Deposit Power in Australia.
The deposit guarantee company had offered products assisting Australian borrowers and investors to buy residential and commercial properties without the need to provide a cash deposit. In a report by the Australian Financial Review, an estimated 10,000 residential, commercial, and property investors could be affected by the company’s collapse.
A call to the company’s Sydney office was only answered by a recorded message saying the company is experiencing external issues and as a result, is not able to process applications on behalf of CBL Insurance.
A notice from the external administrators says CBL Insurance is “liable to pay any valid claims payable to any beneficiary of any guarantee issue by them”, and that all claims should be directed to CBL Insurance.
New Zealand’s High Court ordered CBL Insurance last month to be placed into interim liquidation following the Reserve Bank of New Zealand’s application.
Auckland-based insurance broker and building warranty provider Stamford Insurance said in a statement yesterday that it has stepped in to protect CBL Insurance clients. Stamford said it has secured Lloyd's of London’s help to protect buyers and homeowners.
It is not clear from the company's statement if its scheme to protect CBL Insurance clients will cover those in Australia as well.
“The underwriters in London responded immediately to our request and are committed to providing New Zealand homebuyers with the finest building warranties," said Stamford director Duncan Colebrook in the statement.
Stamford said its scheme will do the following:
1. For buyers who have signed a contract and paid a deposit where work has yet to start, Stamford will cover the risk that they may lose their deposit if their builder becomes insolvent.
2. If construction has already started, Stamford will guard against builder insolvency and provide 10 years’ defects cover on completion.
3. For homeowners who have taken possession of their homes within the past 12 months and who may have lost their protection against major defects arising with their home, Stamford will offer them a new 10 year policy.
Deposit Power’s external administrators said in the notice that an interested party may buy the company’s business, but that “the sale has its complications as the company was only an agent/authorised manager of CBL Insurance”.
“Given the nature of the company’s operation, any sale transaction will need to happen quickly, or it will not happen at all.”
They said they are currently maintaining all employees of the company to assist with enquiries from stakeholders and in an effort to sell the business.
New deposit guarantee product launches for commercial properties
Broker event raises $1500 for charity