What risk factors impact on your HBCF premiums?

icare HBCF's claims experience is that claims are significantly less likely where entities operate as sole traders or partnerships and the longer a licence is held.

As a result, sole traders and partnerships (other than partnerships that include a company) receive a discount as do entities that have been licensed for longer periods. Entities that operate as companies (and/or through a trust arrangement) and entities that have been licensed for shorter periods will attract a loading.

The longest held licence of an entity in a group secured by a Group Trading Agreement (GTA) will apply to all group members.

For entities that operate in other jurisdictions the longest held licence will apply.

Note: For ASR builders or where a financial assessment of a builder's or contractor's Eligibility has not been completed within the past two years (that is, where the last financial review is based on two year's old annual financials or older) the premium weighting will be based solely on this factor.

The net assets retained by a builder in their company can generate either a discount or loading impact for a builder based on the latest (June 30) financials:

• Claims data shows the higher the levels of retained net assets as a percentage of forecast revenue, the lower the frequency of insolvency;
  Builders can choose whether to permit the level of net assets retained in an entity to meet or exceed the minimum three percent benchmark to attract a discounting impact (for example, reduce dividend payments, retain property assets or limit related loans for non-core activity);
• Builders who choose to keep net assets below the minimum 3% threshold will pay a premium loading, as well as being required to address this issue through other commitments to icare HBCF.

For GTA secured groups this pricing factor will consider ANTA retained in the grouping against GTA group turnover.

• Note: For the purpose of premium risk factor calculation, a companies 'retained' ANTA does NOT include a director's personal assets.

Claims experience indicates that entities that have generated strong net profit margins for each of the past three trading years have a low likelihood of claims and as such will have a discounting impact.

Note: For builder groups of related entities – this pricing factor is based on the combined Net Margin of the eligible builders within the group (that is, where only consolidated financials have been provided for the group the outcome will have no impact).

Applies where there is significant and recent history of builder principals being linked to failed entities which have generated HBCF insurance claims, material unpaid creditors, or other characteristics are identified as part of an assessment that present a substantial risk to icare HBCF.

These cases will attract a loading impact that recognises the increased risk.

Note: For builder groups of related entities - adverse history relating to one eligible builder group member will generate a loading impact on all eligible builders in group.

Reviews are scheduled for higher risk businesses earlier in icare's annual review program.

A scheduled review that is 30 days overdue will attract a loading to represent the potential risk.

Overdue reviews include cases where:

• no submission has been made within 30 days of a scheduled review date; or
• a submission has been made on time but is materially incomplete, so icare cannot begin the assessment.

Note: For builder groups of related entities - the overdue review pricing factor will be applied should required information for any GTA group member be overdue (including builder or non-builder members).

Participation in the BCRP can be a condition of a builder's overall Eligibility or can be a condition applied to a specific project.

Builders in the BCRP are less likely to generate claims, and as such attract a discount.

Note: For building groups of related entities – any group member enrolled in the BCRP will activate a discount for all eligible builders within the group.

The existence of additional controls and financial testing of reports by qualified and independent experts increases the comfort in the financial statements reviewed and shows business maturity.

The discount applies where a builder has submitted two consecutive years' signed audited reports, including prior year-end external audited accounts and the most recent year-end external audited accounts for eligibility reviews.

Please note in order to qualify the discount, the two consecutive years audited reports must cover Australian Auditing and Assurance Standards compliance without containing a note concerning a material uncertainty about the ability of the audited entities to continue as a going concern.

Note: For builder groups of related entities - the discount impact applies if the above criteria are met for the financials of all group members.