Hazard insurance levy ‘needs to go up’ but Government won’t hike it for now
Thursday, 12 February 2026
The Natural Hazards Commission says the insurance levy that funds it has to go up or it won’t have enough money to help with a large natural disaster, as climate risk mounts.
But Finance Minister Nicola Willis has ruled out upping the levy for now, saying she is concerned that higher premiums will just push people away from getting insurance in the first place.
Labour says this is a “very risky approach” but has not committed to raising the levy if elected.
The Natural Hazards Commission ‒ which used to be known as the Earthquake Commission ‒ administers natural hazard cover and runs a Natural Hazard Fund that insurers can use in the event of natural disasters.
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Chair Chris Black told a Parliamentary select committee on Wednesday morning that the compulsory insurance levy that funds this cover was too low.
It is currently set at 16c per $100 of coverage, for a maximum of $300,000 of cover ‒ or $480 in levy every year.
“It's not sufficient. So it does need to go up,” Black said.
He said the fund could handle “attritional losses” like those from recent large weather events but not an event on the scale of the 2011 Canterbury Earthquake.
“If you look at the North Island weather events [in 2023], that's 11,000 claims ‒ if you look at Canterbury, that's 170,000 property claims. And so we need to be set up for the big event.”
The commission’s submission said the levy had to go up as changes in climate and the building environment threatened the long-term fiscal resilience of the body.
It said the fund currently relied a lot on overseas “reinsurance” that could become far more expensive as the world became less stable.
The commission had one year left on its existing “catastrophe bond” purchased overseas.
The Commission noted that there was ultimately a Crown backup in the event of a disaster - but this could be in the billion of dollars.
Modelling for a major earthquake in Wellington showed it could cost around $15 billion in total, with the Crown needing to pick up at least $2.5b in costs.
Willis said she had rejected the initial call to raise the levy because the cost of living was already high and she was concerned that sending premiums higher would force some to forego insurance altogether.
“My concern was the result of putting the extra levy on as fewer people take insurance, we're actually cutting off our nose to spite our nose to spite our face, we're shooting ourselves in the foot,” Willis said.
She has commissioned a review into insurance costs and how the hike might impact uptake.
“Simple bottom line is the cost of living is a top of mind concern for New Zealanders. Insurance premiums are have been a significant part of that, and I think it's the right thing to do that the Government not increase by hundreds of dollars a levy on insurance at this time. That does not mean that that isn't a decision that could be taken in future, but it is why I'm doing a deeper dive into the affordability of insurance.”
Labour MP Deborah Russell said this was a “risky approach” but didn’t commit Labour to hiking the levy.
“Reviewing insurance affordability makes sense, but pausing action just because a review is under way isn’t necessarily good enough. The Government still needs to manage long-term risk, not just short-term costs. Delaying now could leave New Zealanders more exposed if a major event hits, and paying higher bills as a result,” Russell said.
“If that disaster happens soon, then the Natural Hazards Commission may need to invoke the Government Guarantee, which means that all taxpayers will end up paying for the next big disaster, whether they own a home or not. It seems unfair to load some of the risks of home ownership onto people who don’t have the benefits of home ownership.”
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