If the cap on building cover remained at $300,000 (as Seymour suggested to the Herald it would) and the rate rose to 24c, home owners would be charged $828 per year (including GST).
This would be $276 more than the current levy of $552.
If the rate rose to 22c, the levy would rise by $207 a year. And if the rate rose to 25c, the levy would rise by $311.
The NHC provides cover for capped portions of residential buildings and land damaged in earthquakes, landslides, volcanoes, hydrothermal activity, tsunamis and storms and floods (land cover only). It leaves private insurers to cover the rest.
The NHC has struggled to recover following the 2010/11 Canterbury earthquakes and faces high future claims costs, with new modelling lifting the likelihood of a big earthquake, construction costs soaring post-pandemic, and the reinsurance market hardening.
It is so underfunded, there’s only a 37% chance its levy income will meet its costs over the next five years, according to Treasury.
If the levy rose to 24c per $100 of insured buildings, the likelihood would rise to 66%.
The NHC must cover the first $2.1 billion of claims related to a natural disaster before it can tap into its $9.2b of reinsurance cover.
Given it only has $500 million in its kitty, if there was a big disaster today, the Government would have to find more than $1.6b to cover claims costs, before reinsurance cover could be used.
Seymour wouldn’t tell the Herald which levy increase he preferred, but said he believed in the accurate pricing of risk.
Reading between the lines, this could suggest Seymour, who is also the Act Party leader, favours a smaller levy increase, to, say, 22c per $100 of insured buildings.
As the Insurance Council of New Zealand explained in its submission to Treasury’s consultation, lifting the levy to 24c would proportionately be a big rise for someone with a relatively low private insurance premium.
The industry group said that if the NHC’s pricing was purely risk-based, low-risk home owners would face “materially” lower levies.
The issue is of interest to private insurers because they collect levies on behalf of the NHC.
Because the levies are tacked on to private insurance premiums, an unobservant policy holder might point the finger at their private insurer, rather than the NHC, for their premium rising.
Suncorp (one of the country’s largest private insurers), in its submission to Treasury, said levies should be based on “robust modelling that balances customer affordability with sustainability of the scheme”.
It feared that if NHC levy hikes put people’s budgets under too much pressure, they would reduce the other types of insurance cover they have. Banks require property they lend against to be insured.
Provided Cabinet makes a call on NHC levies soon, Suncorp supported levies going up from July 1, 2026, to coincide with the implementation of Fire and Emergency New Zealand levy changes.
Suncorp advised the Government against increasing the NHC’s coverage, saying this would “require significant operational changes, including system updates, communication efforts and adjustments to pricing and reinsurance arrangements”.
“More broadly, increasing the NHC cap would mean that a higher proportion of insurance cover was being charged at a flat community rate rather than a risk-based rate,” it said.
“This would reduce the effectiveness of insurance prices as a signalling mechanism for natural hazard risk and would mean that New Zealanders in low-risk locations would be subsidising the cover of those in high-risk locations to a higher degree.”
Seymour had the same view.
“I think one of the biggest problems we have is people building in dangerous places and then getting bailed out by the Government in the form of the NHC,” he said, stressing that he favoured keeping the cap on building cover at $300,000.
Jenée Tibshraeny is the Herald‘s Wellington business editor, based in the Parliamentary Press Gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
