Decision
The fund behind your home insurance levy holds $622.6 million, and the first $2.1 billion of a big quake is its problem alone
Cabinet froze the natural hazards levy at 16 cents against Treasury advice of 24. That keeps up to $274 a year on a capped home. It also leaves about $464 million a year uncollected by a fund that is already $1.48 billion short of the point where its outside cover starts, and if that fund falls short, levy payers or taxpayers make up the difference.
By Henry Smith · Premiums · 2026-01-28
What this means for you The levy line on your home insurance bill stays flat, while your insurer's own charge has risen 40% in two years. The pool of money behind that levy holds less than a third of what a major earthquake would need before outside cover kicks in. Any shortfall comes back from the same levy payers through a government loan, or from taxpayers through a grant.
Every home insurance bill in New Zealand carries a government charge called the natural hazards levy, which buys the first slice of cover for earthquake, landslip, volcanic and tsunami damage to your house and land. The pot it fills, the Natural Hazard Fund, held $622.6 million on 30 September 2025 (The Treasury, 28 January 2026). Before the Canterbury earthquakes it held over $6 billion. And in a single large event, that fund pays the first $2.101 billion of claims on its own, before the outside cover the scheme buys begins to respond (Natural Hazards Commission).
So the fund is holding under 30 cents in the dollar of its own first bill, a gap of roughly $1.48 billion. Cabinet has now decided to leave the levy that fills it exactly where it is, at 16 cents for every $100 of building cover, even though Treasury advised lifting it to 24 cents. The freeze keeps up to $274 a year on a home insured at the cap, and leaves the scheme collecting about $464 million a year less than Treasury says it needs, on the same paper's numbers.
Chart: figures from the Treasury paper cited above and the Natural Hazards Commission; the 2010 bar plots "over $6 billion" at $6 billion.
So what does this mean for me?
If the fund cannot cover the claims, the paper is blunt about where the money comes from. It "must be provided by the Crown through either a loan (to be repaid by levy payers) or a grant (paid for through general taxation)" (The Treasury).
That sentence is the whole story. The freeze does not remove the cost of a shortfall. It decides who pays it, and when. Households keep up to $274 a year now. If a large enough event lands before the levy is rebuilt, the same households pay for the gap afterwards through future levies, or everyone does through tax, with a government loan bridging the years in between. For anyone carrying a mortgage and a house policy, this is a deferred bill rather than a cancelled one.
What did Cabinet actually decide?
The decision sits in Cabinet paper ECO-26-SUB-0003, dated 28 January 2026 and released by the Treasury the following month.
It does two things. It asks the Council of Financial Regulators, the agencies that oversee banking and insurance, to spend six months examining whether home insurance is still affordable, starting with a market assessment by the Commerce Commission. And it pauses the scheduled review of the levy and the wider money settings of the Natural Hazards Insurance Act, the law behind the scheme, to restart "no later than the 2027/28 financial year".
The reason given is household budgets. Cost of living implications "were the main consideration". Home insurance prices have risen three times faster than general inflation since 2011, and 40% in the last two years alone (The Treasury).
Why did Treasury want 24 cents?
The levy is charged on your building cover up to a cap of $300,000 before GST, so a home insured for that much or more pays the maximum. Frozen, that maximum stays at $554 a year including GST instead of rising to $828, which is where the $274 comes from; a home insured below the cap keeps less (The Treasury).
Treasury's view is that 16 cents sits below what the scheme costs to run over the long haul. The rate that would cover those costs, which the paper calls the technical rate, is 24 cents. The reason is the ground, not the houses: in 2022 the official model of New Zealand's earthquake risk was rebuilt, and it raised the expected level of shaking by an average of 50%. Treasury consulted on 22, 24 and 25 cents, and recommended 24.
What odds does the scheme give itself?
At 16 cents, the scheme puts the chance that levy income covers the claims arising over a five year review period at 38%. At 24 cents that chance would be 66%. The paper calls this the probability of sufficiency (The Treasury).
Turn the numbers around and they read as risk. At the frozen rate there is a 62% chance the levy falls short over the period. Even at Treasury's own rate there is a 34% chance, because a scheme built for rare, enormous events can never reach certainty.
The money between the two rates is about $464 million a year. The paper expects the levy to raise about $927 million in 2026/27, and says moving to 24 cents would add "about $464 million per annum" (The Treasury). The check is simple: 24 cents is one and a half times 16 cents, and half of $927 million is $463.5 million.
Hold the rate at 16 cents through 2026/27, 2027/28 and 2028/29 and the scheme gives up roughly $1.4 billion. That is close to the $1.48 billion gap between what the fund holds and the point where its outside cover starts. The unspoken bet is that no event big enough to empty the fund arrives before a rebuilt levy does.
What the freeze does not touch
The levy is only one line on your bill, and it has sat at this level since 1 October 2022, when the maximum moved to $480 plus GST a year (Natural Hazards Commission). The other line is your insurer's own premium, and the freeze does nothing to it. That is the part up 40% in two years, and the part the Commerce Commission has now been asked to examine. Your total bill will keep moving with it.
People are already dropping out. Household survey data in the same paper suggests the share of homes carrying insurance has fallen by roughly 5.5% since 2017, and, as the Commission's own fund page sets out, the government scheme only reaches homeowners who hold a private policy. Cancel the house policy and the natural hazard cover goes with it.
The squeeze rarely stops at the house. When a house premium moves that fast, the covers households tend to cut first are life insurance and income protection, because the mortgage lender demands house cover and nothing else. A trade like that is better made deliberately than left for a renewal date to decide.
The freeze is also a reminder that the money standing behind a claim is not the same everywhere. This scheme has a government guarantee sitting behind it. A private insurer has only its own capital and its own reinsurance, which is what a financial strength rating grades.
For most households the practical read is this: the levy line will be quiet for another year or two, the insurer's line will not, and the bill for the frozen part has not gone away.
What could we not check?
The paper's $554 maximum does not quite reconcile. The Commission's own website puts the maximum levy at $480 plus GST (Natural Hazards Commission), which is $552 once GST is added, and 16 cents per $100 on $300,000 of cover is $480 exactly. The 24 cent version does reconcile, because $720 plus GST is $828 on the paper's own figures. We cannot explain the $2 difference, so we used the paper's own pair of figures. That makes the saving $274. On the Commission's figures it would be $276.
We read the version of the paper the Treasury released to the public, not the Cabinet minute that records the decision itself. Detail on how concentrated the insurance market is has been withheld, along with two paragraphs about work programmes, under the Official Information Act (sections 9(2)(b)(ii) and 9(2)(f)(iv)). The freeze is also a pause rather than a fresh decision on the rate: ministers recorded an intention to stop the review, so the levy stays at 16 cents because nobody moved it, not because anyone re-set it.
One more caveat on that 38%. By the paper's own definition it ignores the money already in the fund and the outside cover bought on top, so it is not the chance the scheme goes broke within five years. Our own gap arithmetic rests on the $2.101 billion trigger point (Natural Hazards Commission), and that cover is renewed every year, so the figure can move.
The paper publishes no average home premium, so we cannot say what share of a typical bill the frozen levy makes up. And the 5.5% drop in people insuring comes from survey data the paper itself flags as limited. Its own footnote puts the share of homes insured anywhere between 83.7% and 95%.
What this means for your cover
What moves a renewal price, and what a review can and cannot change about it. Health insurance in New Zealand
Sources
Every source below was read and checked on 21 August 2026.
- Cabinet paper ECO-26-SUB-0003: Insurance affordability and the review of Natural Hazards Insurance Act financial settings and levy settings, The Treasury, 28 January 2026, released February 2026
- Natural Hazard Fund, Natural Hazards Commission Toka Tū Ake
- About natural hazards cover, Natural Hazards Commission Toka Tū Ake
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