Government announces further review of fire insurance levies

Friday 22 March 2019

Authors: David Friar and Morgan Powell

The Government has announced a further review into the funding options for Fire and Emergency New Zealand (FENZ).

Background

The review follows an earlier review in 2015. Historically, FENZ has been funded by levies on property insurance. The 2015 review rejected calls to move away from insurance levies, and instead recommended a significant expansion of the insurance levy. The broader levy regime has been passed into law, but has not yet come into effect.

Impact

The new review could mean that the new regime never comes into effect. The government paper notes the "significant limitations" with the current funding mode, and says that the review will "canvass a wide range of options for funding FENZ", including whether there are "more suitable options … for funding FENZ than the current levy in property insurance".

The FENZ regime was established under the Fire and Emergency New Zealand Act 2017. That Act represented a significant overhaul of the former rural and urban fire authorities, but expanded the funding model that was based on levies charged on insurance contracts. For example, levies were previously only payable on fire contracts, but levies under the new legislation will be payable on all material damage policies.

The new regime has yet come into force. It is currently scheduled to come into effect on 1 July 2019. However, a Bill to delay commencement of the levy provisions to 1 July 2021 is currently before Parliament. Click here for more details.

Comment

The Government's decision to initiate a review of the funding for FENZ is a welcome development and represents a significant change in the Government's approach to funding FENZ.

The government paper says that the review and implementation of the funding model will take at least two years, with the first step being the publication of a discussion document in June 2019, followed by public consultation through July and August 2019. Possible options for alternative funding models identified in the government paper include:

  • Property based funding mode;

  • Levy paid on car registration; or

  • (Modified) status quo.

We will continue to monitor the progress of the legislation and the review. In the meantime, if you have any questions, please contact the authors or your usual Bell Gully advisor.​


Disclaimer

This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

For more information
  • David Friar

    Partner Auckland
  • Morgan Powell

    Senior Associate Auckland
Related areas of expertise
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