Victorian home builders will be slugged with higher compulsory insurance premiums after the collapse of construction giant Porter Davis and last year's floods.
In state budget estimates on Monday, Victorian Managed Insurance Authority executive officer Andrew Davies indicated the number of domestic building insurance (DBI) claims is expected to double this financial year.
The Victorian insurance scheme covers home owners for incomplete or defective building work and builders are legally required to take it out for their clients on works worth more than $16,000.
Between 1700 and 2000 claims are made over a typical 12-month period, but that number may be as high as 4000 after Porter Davis collapsed in late March, leaving 1300 homes incomplete.
"With that insolvency alone we have currently had in excess of 1700 additional claims to what an ordinary year would be," Mr Davies told the Public Accounts and Estimates Committee.
The state insurer expects to field up to 2500 total claims from Porter Davis customers, with roughly half related to incomplete homes and half from defects within the six-year coverage period.
Mr Davies acknowledged the rise in claims was likely to double the scheme's annual payout from $77.1 million last financial year, when the authority posted a $249.2m deficit.
"We've had two very large events: the October floods and indeed the Porter Davis activity," he said.
"They will have a material impact on our result."
The riskier domestic construction environment would prompt an increase in premiums for builders but an exact figure was not yet settled, Mr Davies said.
The average premium was between $1200 to $1300, which was comparatively low to other states and territories, he said.
Opposition home ownership and housing affordability spokeswoman Jess Wilson said the premium hike would mean higher housing costs and less supply.
"Another cost hike in the form of DBI premium increases will put builders further under strain and this will flow through to Victorian home buyers and further risks for consumers," she said.
Premier Daniel Andrews said the impending rise in premiums was out of the government's hands and stemmed from Porter Davis' unacceptable behaviour.
"We're all going to have to pay for what Porter Davis got up to," he told reporters.
"Whether it's taxpayers having to top up the VMIA or ... having to provide support or assistance to customers who are left short, or indeed premiums having to go up because the market judges this to be a more risky market than it was a year ago."
Some 560 Porter Davis clients were not covered by the insurance despite paying the construction giant before it went into liquidation, forcing the state government to set up a $15 million bail-out scheme.
It is now moving to create a new offence for companies that fail to immediately take out compulsory insurance after customers pay their deposit.
