Inherent Defects Insurance in China

Demand for IDI expertise continues to grow


How to manage special risks and innovative materials is becoming more relevant in fast growing Inherent Defects Insurance (IDI) market in China. SCOR China held a very successful 5th IDI Day in Beijing, under the theme of “Managing Special IDI Risks”, and it has provided much constructive feedback to the Chinese insurance industry, for a more effective risk management in this evolving risk landscape. More than 130 participants across industry associations, primary insurance companies, Technical Inspection Services (TIS) companies and universities attended this SCOR Campus on the 19th April 2023.


“China remains an important market for SCOR’s Global Lines as we are committed to the Chinese market to support the industry with the identification, assessment and mitigation of specialized risks, such as IDI, that are more than relevant for a more sustainable economic development,” says Eric Jenck, CUO and Head of Global Lines of SCOR.


The demand for IDI globally has grown significantly in recent years. Given the recent explosion of the global population which topped 8 billion people for the first time in November 2022, demand for housing, infrastructure and industrial plants has ballooned. At the same time, the land area naturally suited to building has shrunk. On top of this, as the general standard of living has risen in many parts of the world, people have come to expect higher standards of comfort.

As a result, builders have had to come up with imaginative solutions to new technical problems and new materials have been employed to meet the new demands. It follows that the more complex a construction project is, the more complex any potential associated problems could be, and the owners of such constructions sometimes find themselves in dire straits when their property has to undergo radical repairs or rebuilding work. A growing awareness of such risks has led to increasing demand for IDI in markets around the world.


SCOR IDI Day Beijing 2023


China is the country with the largest annual construction volume in the world, but its penetration rate of IDI in new residential buildings remains low. The first IDI policy in China was issued in Shanghai in 2014 with SCOR as a sole reinsurer. Since then, the development of IDI in China has accelerated, particularly in large cities such as Shanghai and Guangzhou where IDI has become mandatory. The Chinese government intends to increase the construction quality throughout the country, so IDI will play an essential role to achieve this goal as new residential buildings will then be the focus.
While IDI is gaining traction, new risks are emerging such as high-rise residential buildings, constructions built on special geotechnical areas, or projects using innovative materials.


“Starting in France more than 40 years ago, IDI has been widely recognized and promoted as an effective insurance mechanism to increase building quality throughout Europe,” Jaume Avella Fluvia, CUO of IDI of SCOR, comments. “China’s IDI market is still nascent and SCOR’s global expertise supported by our local presence will be essential to ensure a sustainable development of this product aimed to protect the population.”


The fifth IDI day of SCOR China has created once again a great platform to exchange views in the management of this risk ecosystem.
“SCOR China has been always at the forefront of the industry in innovation of product development and technology in IDI insurance, providing strong and professional technical support for IDI legislation, preparation of relevant standards and regulations, and research on various topics,” commented Sven Liu, CEO of SCOR Beijing branch.
Those special risks in IDI require a strong risk management expertise. Looking ahead, SCOR will continue to transfer its IDI expertise and provide high-quality reinsurance services to the industry and its primary insurance partners.


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