New Zealand is viewed as the second riskiest country in the world when it comes to natural hazards, behind only Bangladesh.
Tina Mitchell, chief executive of the Natural Hazards Commission (NHC), informed Parliament’s Finance and Expenditure Committee (FEC) of this view held by reinsurers during the Commission’s annual review on Tuesday.
New Zealand is seen as high on the natural hazard scale because the country is susceptible to a wide range of climate risks above and below ground. Natural hazard threats above ground include severe weather events like floods, tsunami and cyclones, while below ground NZ faces risk from earthquakes and volcanoes.
“We want people to be risk literate when it comes to natural hazards because you just never know when it’s going to be your house,” Mitchell said.
“Every single person should be thinking about their property and what their risk profile is.”
The NHC is the new name for the Earthquake Commission (EQC) which went through a name change back on July 1, rolled out alongside the new Natural Hazards Insurance Act.
The Act was passed in 2023 under the previous Labour government and keeps the coverage mostly the same, but clarifies entitlements and improves the claims process for homeowners.
It also better represents the broad spectrum of natural hazards covered by the Commission, including tsunami, landslides, volcanic activity, earthquakes, and geothermal events.
During the NHC's slot in front of the FEC on Tuesday, NHC Chairman Chris Black said the Commission had achieved a lot in its financial year which ended June 30.
The NHC reported $853 million in premium income during the June-year, up from $612 million the prior year. That’s a $241 million, or almost 40%, increase.
The premium income comes from the Natural Hazards Insurance (NHI) levy which is collected by private insurers. This levy gets paid into the Natural Disaster Fund (NDF) and the Crown Guarantee, which are both managed by the Natural Hazards Commission.
The NHI levy used to be called the EQCOver levy under EQC and is currently 16 cents per $100 of the insurance cover amount – up to a maximum amount of $480.
Black told the FEC that analysis had shown that the current levy is insufficient by 50%.
“So it should be 24 cents probably, versus 16 cents on the current settings to break even over time,” he said.
The levy amount and the levy settings are currently under review.
Black said the Natural Hazard Portal, launched in July 2023 to help people find information about natural hazards claims on specific properties, had reported over 40,000 hits by June 2024. That number has grown to 80,000 since then.
“So we’re really seeing the uptake and people interested to understand and be better aware. What we're trying to do is help people make better informed decisions, homeowners, purchasers, councillors,” Black said.
Mitchell said the NHC had found people were using the hazards tool to search for property information – and then requesting property files from the NHC through Official Information Act requests (OIAs).
“We had 17,000 OIA requests in the last year. So what that tells us is that it's a tool that is being used and it is making a difference because people still can go on and buy the property. They're just more aware of what they're buying and they can make decisions accordingly,” Mitchell said.
The land claim epiphany
During the FEC meeting Labour MP Duncan Webb prodded Mitchell and Black on how prepared the Commission was for a “truly catastrophic event” off the back of the NHC getting low customer satisfaction scores in a recent independent review.
In October, the Commission published an independent review that consultancy firm Martin Jenkins had undertaken earlier this year over the Commission's response to the severe weather events in the North Island in 2023.
The Martin Jenkins report found that overall customer satisfaction targets were not met by the NHC, with only half of those surveyed being satisfied with their overall claims experience.
Black said 95% of the claims the NHC had received from the Auckland floods and Cyclone Gabrielle had a land component to them, and people's expectations around land damage had to be managed “very carefully”.
The cover provided by the NHC is generally a contribution to repairs and won’t always be enough to fully repair all of the land damage in someone’s claim.
“People are disappointed with that,” Black said.
Mitchell told Webb that if the Canterbury earthquakes had been the “building epiphany” for people, the Auckland floods and Cyclone Gabrielle had been the “land claim epiphany”.
Webb also wanted to know what the cost of assessing a claim was as a percentage for the NHC to which Mitchell replied that the NHC “can’t do Swedish rounding” due to it being a public sector entity.
“All of our costs have to be fully transparent and we are balancing accuracy and speed. And if we make an inconsistent decision on one claim, there will be a lot of complaints and queries, quite rightly, from others who see that it's an inconsistent treatment,” she said.
Reinsurance loyalty
Mitchell told the FEC while the international reinsurance market had pulled back from some countries in recent years, global reinsurers had shown “loyalty” to New Zealand.
“They really think that our operating model, where we partner with insurers, is just smart because you can scale up immediately with a standing army of claims managers and other countries don't have that,” she said.
Reinsurers also like the NHC’s investment into natural hazards, according to Mitchell. The NHC spent $10.5 million in research grants and sponsorships during its 2024 year.
The Commission spent $414 million on reinsurance cover in the 2024 year, up from the $286 million the NHC paid for reinsurance a year earlier – a $128 million increase.
This secured the NHC a record level of reinsurance of $9.2 billion starting from June 1 2024, which is almost a $1 billion more from the previous year.
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