Natural Hazard Insurance levy on homeowners has to rise, but how high does it have to go?
Wednesday, 20 May 2026
With New Zealand experiencing a storm on average every eight days, thousands of properties in coastal inundation and flood zones could become uninsurable. Our new series explores the impacts of relentless weather events on families and communities, asks for how much longer insurance will be available, and how the Government is planning to respond.
ANALYSIS: The Natural Hazard Fund - our cash reserve to help pay for big disasters - shows its liabilities outstrip its assets.
The fund expects to return to a net asset position in the 2027 financial year.
In the meantime, it can support the settlement of current claims to $760m, so it doesn’t mean homeowners will be left high and dry.
However, it is also true homeowners will need to stump up more money every year to refill the coffers.
However, Treasury’s recommended $464 million-a-year levy increase isn’t going to happen this side of a general election in which the the cost of living is the most pressing issue for voters.
The fund exists to help pay for New Zealand’s Natural Hazard Insurance (NHI) scheme run by the Natural Hazard Commission Toka Tū Ake (formerly the Earthquake Commission or EQC). The mandate is repairs and rebuilds after earthquakes, volcanic eruptions or tsunamis, and to a much lesser degree storm and flood for which only limited damage to land is covered.
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Homeowners currently pay a 16 cent Natural Hazard Insurance levy on every $100 of private insurance they have up to a cap of $300,000. That equates to a maximum $480 levy, with GST added on top.
In return, NHI pays the first $300,000 of damage caused by a disaster covered by the scheme, with homeowners’ private insurers covering costs over that.
But in 2024, Treasury told the Government the levy needed to rise to 24c to allow the fund to meet the NHI’s expected future natural disaster claims costs. That would make for a maximum $720 levy, plus GST.
Should the terms of cover ever change, such as expanding cover more storm damage, levies would have to go even higher.
The increased levies would gradually refill the fund’s coffers, so the NHI scheme could rely less on expensive “reinsurance” bought from international reinsurance companies based in places like New York, Zurich and London, which the fund could call on to help pay huge surges of claims.
Going into 2011, the Natural Hazards Fund had total assets of $6 billion and reinsurance of on top of that of $2.5b.
Then came the Canterbury and Kaikōura earthquakes, and the 2023 Auckland Anniversary Weekend floods and Cyclone Gabrielle weather events.
By the end of June 2025, the fund was drained.
There was still nearly $1b in assets, but it had liabilities, including outstanding claims of more. However, the fund had secured a record level of international reinsurance of $10.3b to ensure it could pay claims after a disaster.
And, behind the fund stands a taxpayer guarantee. Should claims after a disaster exceed the fund’s capacity to pay them, the government would raise the funds to make up any shortfall, and then raise levies in the years following to get it back.
There are several reasons why the NHC levy needed to rise.
Construction costs have risen dramatically, and so has the housing stock.
Seismic modelling in 2022 indicated a 50% increase in the likelihood of future quake hazards.
Reinsurance is also costing more.
Treasury’s advice to the Government had insurers worried.
Insurers collect the levies for the NHC in the same way that cigarette companies collect customs and excise tax by embedding it in their prices.
The bill an insurer sends a homeowner each year includes the NHI levy, the Fire and Emergency (Fenz) levy, the insurer’s own premium, and GST on each of those.
A Medical Assurance Society “example” illustration of how this can add up shows an insurer premium of $4486, an NHI levy of $480, a Fenz levy of $106, and GST of $780.
Insurers worried higher levies would make house insurance look even more expensive, potentially meaning some homeowners would no longer be able to afford it, especially those with flood-prone homes, who had already been hit with higher premiums by private insurers.
Insurers wanted the levies to be collected by local councils when homeowners paid their rates.
Finance Minister Nicola Willis was also concerned about affordability, Cabinet papers show.
She paused the NHI levy review, pending the completion of a review into the affordability of private insurance.
The effect was to kick the levy can down the road until after the general election, due now to be held on November 7.
The latest OPSOS New Zealand poll of issues that mattered most to voters was topped by the cost of living/inflation, which was a country mile ahead of all the other issues.
When Cabinet ordered the affordability review, it expected to be informed of the findings in mid-2026 by the Council of Financial Regulators, which is a self-convened association of the Reserve Bank, the Financial Markets Authority, Treasury, the Commerce Commission, and the Ministry of Business, Innovation and Employment.
Willis confirmed that remained the plan.
Clarification: The story has been amended to say that while the company’s balance sheet shows the NHF to be in deficit, there is a balance of $760million with which to support the settlement of current natural hazards insurance claims currently.