New Zealand: Earthquake Commission levy increase
The New Zealand government has announced an increase in the Earthquake Commission levy that will take effect from 1 November 2017.
The New Zealand Government has announced an increase in the Earthquake Commission (“EQC”) levy as part of the 2017 Budget.
From 1 November 2017, the EQC levy will increase from 15 cents to 20 cents per NZD 100 sum insured. Any contracts agreed before 1 November 2017 will retain the 15 cents levy.
The regulations to effect this change have been drafted and are expected to be released in October 2017.
The EQC provides natural disaster insurance to residential property owners in New Zealand. All residential property owners who buy fire insurance from private insurance companies automatically acquire Earthquake Cover (“EQCover”), which is the Commission’s geological insurance cover. EQCover premiums are added to the cost of the fire insurance and passed to the EQC by the insurance company.
Residential buildings are insured under EQCover for their replacement value, up to NZD 100,000 per event for each "dwelling" in the building. Property owners can obtain top-up cover from private insurers to insure against natural disaster damage to the building above the EQC limit.
The earthquakes in Canterbury and Kaikoura have depleted the Natural Disaster Fund because of the high cost of claims. The levy increase will help to replenish the fund to ensure that the EQC can continue to pay claims for natural disasters in the future. The increase in the levy is expected to raise NZD 26 million in 2017/18 and NZD 94 million in 2018/19.
Policyholders will now pay a maximum levy of NZD 276, which has increased from NZD 207.
Managing agents should ensure that the correct levy amount is charged on fire insurance contracts on both cross-border business and business written by coverholders.
For further information, please contact: