Double Government Levy Increase on the way
30 May 2017

Fire Service Levy (FSL) Increases from 1 July 2017
Earthquake Commission Levy (EQC) Increases from 1st November 2017.

May 2017

The government has confirmed that the FSL, which is charged as part of your insurance invoice, will increase effective from 1st July 2017.

The increases are:

  • Residential property FSL - an additional $30.00 per annum for residential buildings and $6.00 per annum for contents, making the new combined FSL $146.28 including GST.
  • Motor vehicles (less than 3.5 tonne) – a FSL increase of $2.37 per vehicle per annum, making the new FSL, per vehicle, $9.72 including GST
  • Commercial property (non-residential) and vehicles over 3.5 tonne – the FSL rate increases to 10.60 cents per $100 insured from 7.60 cents per $100.00 excluding GST. 

This increased rate will be for an initial 18 month period until a new levy rate can be determined from the newly formed FENZ, which will come into effect from 1 January 2019.

Fire and Emergency New Zealand Bill (FENZ)

One purpose of the FENZ Bill is to combine the urban and rural fire brigades. The cost of merging the urban and rural fire brigades has been reported by Minister Peter Dunne to be $303 million. Levy payers are to fund $263 million of this through FSL being charged on their property, motor, contract works and home and contents insurance policies. The FSL increase has been triggered by the merger costs along with the ongoing funding of the rural fire brigade

This Bill also repeals the two Acts governing fire services, the Fire Service Act 1975 and the Forest and Rural Fires Act 1977, to give effect to a single, unified fire services organisation for New Zealand.

While the legislation has been passed, several important aspects relating to the levy have yet to be determined. This work is important as it will influence the amount of the levy that has yet to be set, when the new levy regime takes effect.

The Minister recently announced that the new levy regime which was initially scheduled to come into force in July 2018 has been delayed by 6 months to 1 January 2019. This is to allow further time for the insurance industry to adjust and get ready for the new levy regime and to allow FENZ to model the new levy rate accurately. Until then the transitional levy rate detailed above will continue to apply and run from 1 July 2017 – 31 December 2018.

Additionally the government announced this week that it will also be increasing the Earthquake Commission (EQC) levy effective 1st November 2017.

Homeowners' insurance premiums will rise by up to $69 per annum, as Government aims to top up a natural disaster fund depleted by the Canterbury and Kaikoura earthquakes.

The increases are:

  • Residential Buildings EQC Levy – an additional $57.50 including GST
  • Residential Contents EQC Levy – an additional $11.50 including GST

 

This makes the new combined EQC levy $276.00 including GST. Levies are based on the maximum cover of $100,000 for buildings and $20,000 for contents.

The levies will help to top up the National Disaster Fund, which pays out claims related to earthquake damage.

The EQC fund has paid out $9.5 billion so far in claims to people affected by the Canterbury earthquakes. Another $550m is expected to be paid out for claims related to the Kaikoura Earthquake, which has exhausted the fund's reserves.
DobThe Earthquake Commission has a Government guarantee and $4.7 billion in re-insurance cover, so homeowners will be covered if there is another natural disaster.

Minister responsible for the Earthquake Commission Gerry Brownlee, said the levy rise would ensure EQC’s sustainability in the future.

“It would currently take more than three decades before the Natural Disaster Fund reaches EQC’s reinsurance excess of $1.75 billion – and that’s in the absence of any significant natural disaster like the Kaikoura earthquake,” he explained.

“The new levy rates mean we will be well on the way to restoring the fund to this level within 10 years,” he added.

 

For more information contact your ICIB broker.

Go Back