The New Zealand government has announced a 33% increase in the Earthquake Commission (EQC) levy to replenish the natural disaster fund depleted by the 2010-2011 Canterbury and 2016 Kaikoura earthquakes.
The increase, which will take effect on 1 November, will affect those with home insurance cover as the levy is set to be increased from 15 cents to 20 cents per $100 of home insurance cover. The cap on the maximum homeowners have to pay will be pushed out from NZ$207 (US$146) to NZ$276 including GST.
While the EQC has reinsurance cover of NZ$4.7 billion, the Minister Responsible for EQC Gerry Brownlee says it would take more than 30 years for the Fund to reach the point where it could cover the NZ$1.75 billion excess of this cover, assuming there isn’t another significant disaster like the Kaikoura earthquake.
“The new levy rates mean we will be well on the way to restoring the Fund to this level within 10 years,” Mr Brownlee said.
Mr Tim Grafton, Chief Executive of the Insurance Council of New Zealand (ICNZ), says the EQC levy increase came as no surprise.
"We have known as a result of the Kaikoura quakes and the Canterbury quakes that the natural disaster fund has been drastically reduced. From a government perspective, it makes sense."
But he said that the increase was being introduced in a year where the government was already planning a hike in the fire service levy.
From 1 July, people with home, contents and car insurance will have to start paying a 39% increase in the levy to fund Fire and Emergency New Zealand (FENZ).
Mr Grafton said the risk of increasing insurance costs was that people dropped their insurance and it was a particular risk for low income people. "There is an increasing risk they will not insure or will under- insure," he said.
The ICNZ says that general taxation should fund the NZ Fire Service which benefits everyone, insured and uninsured alike.