QBE Insurance has advised the South Australian Government that it will be withdrawing from the Building Indemnity Insurance (BII) market from the beginning of July.

The BII market is a legal requirement for all builders throughout the state, and protects owners from insolvency, death or disappearance of their building up to a maximum of $80,000 per building contract.

"QBE has advised the State Government that it is no longer viable for it to remain in the market because the increased volume in residential builder insolvencies necessitates such a significant increase in premiums that it is impractical for all involved,” State Minister for Business Services John Rau said.

QBE will continue to honour policies written prior to 30 June 2013 and have provided an undertaking to collaborate with the State Government to create a feasible and enduring long term solution.

"While the State Government understands QBE's rationale for deciding to exit the market, it is nevertheless disappointed that this will be happening at a difficult time for the building industry," Mr Rau said.

"As this insurance is compulsory under legislation, the State Government is committed to working with industry experts to develop a viable long term solution to this issue.”