Understanding the 10-Year Builder Insurance in Colombia and Its North American Relevance
Recent regulatory updates in Colombia, specifically Decree No. 282 from February 2019 and Decree No. 1687 from 2020, make a ten-year builder insurance mandatory starting January of this year. The change represents a major shift in how construction projects handle risk and accountability, extending protection not only to buyers but to the builders themselves or the entities transferring property. This policy framework is designed to ensure that funds are available for reconstruction or compensation in the event of substantial damage, giving buyers greater assurance from the outset.
Historically, incidents such as the Terraza del Space building in Medellín in 2014 and the Blas de Lezo tower incident in Cartagena in 2014 raised concerns about construction quality, safety standards, and the potential financial impact on residents and investors. The new ten-year insurance policy acts as a backstop against those risks, addressing situations where a building may suffer significant harm or collapse and where responsibility must be clearly allocated to fund repairs or replacement swiftly.
Industry observers note that this insurance solution is now being adopted across the market, with insurers estimating premium ranges in the 1,200 to 1,800 million peso band for 2022. The emphasis here is not only on protecting buyers’ interests but also on safeguarding the assets of developers and sellers involved in the construction and transfer process. In practical terms, policyholders who secure this insurance can expect coverage that enables full reconstruction costs to be recovered in the event of loss, subject to policy terms and coverage limits.
According to representatives from Seguros Mundial, the company has integrated this product into its portfolio for more than two years. What began as a voluntary policy, used to demonstrate to investors that projects are financially sound and resilient, has evolved into a mandatory standard for new developments in the country. Even with its broader adoption, the policy has faced challenges in achieving widespread uptake within the market, reflecting broader industry conversations about risk awareness and the formalities of insurance culture in Colombia.
Juan Enrique Bustamante, president of Seguros Mundial, explains that the industry’s path to a universal ten-year coverage plan required patience and collaboration. The shift from voluntary to mandatory status has been accompanied by a careful redesign of policy features to reflect market realities, including coverage for both structural integrity and the financial return promised to buyers. In this framework, the insurer positions the ten-year policy as a core instrument for risk management in residential construction, aligning the interests of buyers, developers, and lenders while delivering a clear pathway for compensation in the event of a covered loss.
From a market perspective, the ten-year builder insurance is part of a broader movement toward enhanced project reliability and investor confidence in Latin American housing markets. While the specifics of policy terms may vary by project and insurer, the overarching goal remains consistent: to secure durable housing and provide a dependable mechanism for reconstruction when significant damage occurs. The policy is designed to function as a long-term guarantee, reducing the likelihood that buyers face costly, uncertain recoveries after construction is complete and occupancy has begun.
In this evolving landscape, builders and property developers are increasingly factoring insurance costs into project budgets, recognizing the value of proactive risk management in attracting buyers and securing financing. For buyers and residents, the ten-year coverage offers a tangible layer of protection that complements other safeguards, such as local building codes and quality control processes. As the market in Colombia continues to mature, the role of insurance in supporting fair treatment of property losses becomes more evident, with the policy acting as a credible hedge against construction-related uncertainty.
Source: Lare Publica