Jenee Tibshraeny: NZ Herald Wellington business editor on the Government delaying insurance levy hike

The Government is delaying hiking the levy most home owners pay via their private insurers to fund the Natural Hazards Commission until 2027.

The $552 levy was supposed to go up by between $207 and $311, but reports claim ministers are still considering their options, with Finance Minister Nicola Willis saying she didn't want to make a 'hurried decision'.

NZ Herald Wellington business editor Jenee Tibshraeny explained further.

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Episode Transcript

Speaker 1 (00:00):
The government's delaying a hike, as I was telling you earlier,
to its insurance levy. The hikes was supposed to go
up by about two to three hundred dollars from mid
next year. Nichola Willis has just announced she's going to
delay the rise by a year, so it'll kicking after
the election. Water Surprise Genative Trainee is The Herald's Wellington
Business editor and with us Hi Jena, why the delay.

Speaker 2 (00:20):
Well, Nikola Willis told me that she's aware that, you know,
insurance premiums have been rising a lot in recent years.
They've really put households under pressure, and you know, she
doesn't want to add to that cost. She's also mindful that,
you know, if insurance premiums go up by too much,
then some households might water down their cover or get

(00:42):
rid of their insurance altogether, which then would cause an
even bigger problem for you know, New Zealand, for the
resilience of households. So look, I think that this issue
is pretty interesting. I became aware of it because the
Treasury reached out to insurance companies to let them know

(01:03):
that nothing would be done before mid twenty twenty seven.
So I don't know if the government was ever going
to announce this, but it has just quietly pushed the
can down the road. The issue is that the Natural
Hazards Commission does not have enough money to cover the
costs of a big disaster. So, you know, the Treasury

(01:24):
reckons these levees really do need to go up, but
of course no government minister, particularly this government, wants to
hike taxes effectively, if we're being political about it.

Speaker 1 (01:36):
Yeah, so at the moment it has about six hundred
billion and it's kitty, right, What should it actually have
in order to cover a big event?

Speaker 2 (01:43):
Yeah, so the reinsurance that the Commission has that only
kicks in if the costs exceed two point two billion dollars,
So anything below two point two for a certain event
needs to be covered by the Commission. But the Commission
only has six hundred million and it's kitty. So that

(02:06):
means if there is a big disaster, the Crown could
have to pay up to one point six billion dollars.
So the thing here is that effectively someone always has
to pay. The model we have the idea is that
it's sort of doesn't expose the Crown's balance sheet too much,
you know, it keeps the cost contained. You're a homeowner,

(02:26):
you pay the levees, you know, the levees attacked onto
your private insurance premiums, you pay levies, and then when
you need to pay out, you tap into this. But
you know, if more of the cost falls on the crown,
then that means the crown needs to borrow more and
the cost of that, you know, of covering homeowners is

(02:47):
covered by all of us people who don't own homes
as well, and the cost gets pushed out into the future,
you know, the future generations who then take on that debt.

Speaker 1 (02:56):
So in the point that you've just made is that
at two point two billion, that's when the if the
cost exceeds that, that's when the reinsurers kick in because
it hasn't got enough money and it's kitty, we are
not going to miss out on this, right. The government
can top it up to two point two and then
we get the reinsurance.

Speaker 2 (03:11):
Yes, the government can top it up. So it's just
you know, it's just a matter of who pays. Do
we all pay or do just homeowners pay?

Speaker 1 (03:17):
Yeah, brilliant Jinnay, Thanks very much for really appreciate you
explaining that it's jen Nahib training the Heralds Wellington Business Editor.
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