A Brief History Of The Deposit Guarantee (aka Deposit Bonds)

Ever wondered where deposit bonds came from? Deposit bonds, also known as deposit guarantees, have been helping Australians buy houses for almost two decades. So how did it all begin?

Here’s a brief look at the moments in time that created the deposit bonds, Australia knows today:

1989: Short-term deposit guarantees arrive

While Aussies are queuing for Nintendo’s Game Boy, swaying to Madonna’s Like A Prayer and reeling over the end of free university education, something big is about to shake up the property world. Deposit guarantees enter the Australian market, giving home buyers a smart alternative to a cash deposit.

1990s: Deposit guarantees take flight

Australia’s property market booms again after the stagnant eighties. Banks start accepting deposit guarantees as a faster, more streamlined process than the longer, more expensive ‘bridging finance’ offering.

February 2000: QBE Insurance (Australia) ltd. backs deposit bonds 

While Aussies are still nursing hangovers from the turn of the century, QBE starts underwriting deposit bonds. QBE itself has been around since 1886, when it started providing insurance against shipping and trading risks. Back then it was known as the North Queensland Insurance Company Ltd and had just one employee.

Today, QBE Insurance Group Limited is ranked as one of the world’s top 20 insurers, with a credit rating of ‘A+ Stable’. Its deposit bonds, like those provided by Deposit Assure, are the most widely accepted deposit bonds Australia-wide.

November 2000: Deposit bonds get stronger

At the end of the year, the credit strength of deposit bonds is enhanced when the Australian Prudential Regulatory Authority’s (APRA) monitoring powers are expanded to include General Insurers. APRA was already monitoring banks and life insurance companies. For the first time, General Insurers are placed on an equal assessment process and credit rating structure as licensed banks. This means the credit worthiness of bank guarantees and deposit bonds is on an equal footing. If a bank is rated A+ and the insurer A+, then both products have an equal credit status.

2001: Long-term deposit bonds arrive

House prices start to really take off in Australia, with an average annual increase of almost 15% from 2001 to 2003. This year also sees the long-term deposit bonds, Australia has been waiting for. For the first time, off the plan buyers can use deposit bonds instead of a cash deposit.  

2015: Deposit Assure launches

Entrepreneur Etienne Rizzo saw huge potential in Australia for a deposit bond provider with a difference. In 2015 he launched Deposit Assure with the simple mission to make it easier for people to buy property. Deposit Assure’s deposit bonds are backed by QBE Insurance (Australia) Ltd.

November 2017: New refund policy launched

Deposit Assure announces its new fee refund policy for long term deposit bonds. Under Deposit Assure’s new policy, buyers will be eligible for a pro rata refund of their premium, where their purchase settles more than 6 months before the expiry date on the deposit bond, up to a maximum value of 18 months. This has the potential to make a huge difference to off-the-plan buyers especially and makes long term deposit bonds a more attractive option.

The Future

We can’t predict what will happen in the Australian property market (sorry!). But one thing’s for sure – as the Australian property market evolves, so too will deposit bonds. Especially as companies like Deposit Assure and QBE continue to look for new ways to provide the types of deposit bonds, Australia needs.

Read more about how Deposit Assure started here.

Got more questions about deposit guarantees? This article answers the 10 most common questions.

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