The New Zealand government has opted to defer its decision on whether to raise the Natural Hazards Insurance Levy, citing ongoing concerns about the affordability of insurance for households. Finance Minister Nicola Willis addressed the issue, noting that insurance costs have become a significant factor in the cost-of-living pressures experienced by many New Zealanders.
Earlier this year, the Treasury, on behalf of Associate Minister for Finance David Seymour, initiated a consultation process with stakeholders including insurance industry representatives, subject matter experts, and community groups. The review examined the financial settings and levy structure under the Natural Hazards Insurance Act 2023, presenting options such as maintaining the current levy or increasing it.
The levy, which is paid by homeowners as part of their insurance premium, is allocated to the Natural Hazard Fund. The fund is used to pay out claims following natural hazard events, purchase reinsurance, cover administrative costs for the Natural Hazards Commission (NHC), and support research and education related to natural hazards.
Willis said any plan that could increase New Zealanders’ insurance expenses by several hundred dollars warranted thorough examination. “[Insurance is] a major cost-of-living pressure, and a proposal which sought to add potentially hundreds of dollars to New Zealanders’ insurance bill was one that I thought was appropriate [that] we scrutinise very, very carefully,” Willis said, as reported by Interest.co.nz. She added that the government would continue to assess the proposal and bring recommendations to Cabinet.
The Insurance Council of New Zealand (ICNZ) expressed support for the government’s decision to delay any increase in the levy. ICNZ chief executive Kris Faafoi said: “Keeping the levy unchanged for now is good news for households facing ongoing cost-of-living pressures.”
A recent ICNZ survey found that half of respondents would not be willing to pay an extra $200 per year in insurance premiums to further fund the NHC. The survey also showed that 21% were undecided, while 30% indicated they would be willing to pay more. Faafoi commented: “We know it’s a difficult time for families, with the cost-of-living foremost in Kiwis’ minds as they manage their budgets.”
Currently, the NHC provides up to $300,000 per event for the repair or rebuilding of residential homes, with the levy set at 16 cents per $100 of insurance cover. Consultation documents outlined options to keep the levy at this rate or increase it to 22, 24, or 25 cents per $100 of cover, with 24 cents identified as the technical rate.
If the levy remains unchanged, the annual cost would be $480. Raising the levy to 22 cents would result in an annual cost of $660, while 24 cents would mean $720, and 25 cents would bring the total to $750 per year. The consultation also considered increasing the building cover cap to $400,000.
Affordability issues extend beyond the levy itself. Consumer NZ has reported a rise in the number of households discontinuing insurance due to cost. According to data, 7% of households dropped insurance in 2022, a figure that increased to 17% in 2025. Insurance is now among the top four financial pressures for New Zealanders, alongside housing, food, and household debt.
A survey commissioned by the NHC and conducted by NielsenIQ found that only a third of insured homeowners are confident in their understanding of what their policies cover for home damage after a natural disaster, and just over a quarter are confident about land damage coverage.
Faafoi emphasised that addressing the increasing risks associated with climate change calls for a unified national approach. “Balancing affordability with the sustainability of the NHC scheme is a shared challenge. The government, NHC, and insurers all have a role to play in keeping premiums manageable,” he said.
