Nicola Willis says Insurance Council levy proposal to help with natural hazard risk reduction not necessary if a prudent government is investing in infrastructure

Finance Minister Nicola Willis says she doesn't think it's necessary to have a specific levy to achieve resilience against natural hazards, "if you have [a] prudent Government investing in infrastructure." 

This comes as the Insurance Council of New Zealand (ICNZ) suggests the Fire and Emergency (FENZ) Levy be replaced with a ‘Community Protection Levy’ - with the money going towards natural hazard risk reduction while FENZ's funding would move from insurance-linked levies to Crown funding.

Currently, FENZ is primarily funded by this levy - which is part of a person’s premiums if they have insurance cover for property in NZ against the risk of fire. The levy also applies to motor vehicle insurance policies. According to ICNZ, FENZ currently raises around $800 million annually through the levy.

'Absolutely a legitimate debate'

But speaking to the audience at the ICNZ conference in Auckland on Thursday, Willis said: "I recognise there are differing views about how resilience and emergency response systems should be funded."

On the ICNZ's proposed 'Community Protection Levy', Willis said; "that is absolutely a legitimate debate." 

“We do need to consider that in the context of the Government’s wider fiscal position and the significant pressures already facing taxpayers. There is no free lunch, so at a time when the Government is focused on returning the books to surplus, reducing debt, rebuilding fiscal resilience, we do have to carefully prioritise where new spending commitments are made.”

Asked by MC Miriama Kamo whether she would support the proposal during a question and answer session, Willis said; “show me the money. To answer the question, we are already as government, stepping up investment and resilience.”

Willis pointed to Budget 2026's investment in infrastructure, using resilience projects for roads as an example.

It was about identifying roads that have been most affected by weather events and it was about recognising that it was expensive and “fiscally stupid” to just rebuild them every time,” she said.

Willis said instead, the Government was putting aside funding to strengthen these roads now so they could better withstand those events and those were the sorts of investments the Government intends to continue.

“But having a specific levy to achieve that, I don't think is necessary if you have prudent Government investing in infrastructure.”

“Our view is that New Zealanders, who all pay tax, should expect their government, when it’s making infrastructure investment decisions, to be prioritising resilience,” Willis said.

Insurance affordability review

Willis said insurance couldn’t be considered in isolation and it was one component of a broader risk management system.

“That includes land-use planning, infrastructure and engineering solutions, emergency management, adaptation planning, and individual and community preparedness.”

Willis said: “The reality is that maintaining access to affordable and available insurance will become increasingly important for New Zealand’s economic resilience over time.”

“A resilient insurance market supports household resilience, mortgage lending, business confidence, broader economic stability,” she said, which was why the Government had directed the Council of Financial Regulators to review residential insurance affordability.

This review, which will take six months, was first announced in February by Willis and then-Commerce and Consumer Affairs Minister Scott Simpson.

While insurance remained widely available in NZ, affordability pressures have increased, she said.

Insurance premiums had increased at a much faster rate than general inflation and New Zealanders in areas exposed to earthquake and flood risks have faced particularly big increases, she said.

“While I welcome the moves by Tower and others to use risk-based pricing, it is a reality that for government we need to understand the implications that this will have for the general public as a whole.

Willis said officials would be reporting back to her on the consultation with insurers and later in June, this would inform the Government’s deliberations on next policy steps.

“While insurance uptake does remain relatively high, we need a better understanding of whether rising premiums will affect under insurance over time.”