Levies on Fire Services: New Approaches Could Impact Commercial Property Costs
Levies on Fire Services: New Approaches Could Impact Commercial Property Costs
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
Upcoming modifications to New Zealand's emergency services funding methodology might result in notable levy increases for commercial real estate owners, consequently hiking non-insurance risks, according to industry experts.
According to projections by the Insurance Brokers Association of New Zealand (IBANZ), total levies across commercial properties could see a dramatic rise, potentially doubling under the current consultation proposals.
"Our members are already observing clients either cancel coverage or decrease their coverage level as they attempt to navigate prolonged high inflation and higher insurance premiums," says Mel Gorham, CEO of IBANZ.
"This new approach will likely make premiums less affordable, leading to more instances of underinsurance or decisions to forego insurance altogether," she further added.
The revised framework for the Fire and Emergency New Zealand (FENZ) levy is scheduled to begin on July 1, 2026, but critical decisions regarding its collection methodology are required by December 2023 to give the insurance sector ample time to implement the changes.
The suggested revision includes switching the calculation base for the levy from the current indemnity value method to the sum insured typically used in insurance policies. Presently, the current levy for commercial building insurance is calculated based on indemnity value.
Gorham points out that for older or poorly maintained buildings, the indemnity value can sometimes be as low as 25% of the sum insured, and the proposed model hasn’t thoroughly considered the full impact of this shift.
"We have been highlighting the potential affordability issues if the disparity between sum insured and indemnity value isn't taken into account," she mentioned to insuranceNEWS.com.au.
IBANZ has raised alarms that building value increases could lead to levy spikes by up to 400% by the time the changes are fully implemented in July 2026 if properties are to stay adequately insured.
The consultation document notes that the non-residential property rate would decrease marginally to NZ11.51 cents per $NZ100 insured from NZ11.95 cents. However, Gorham maintains that this reduction falls short of mitigating the comprehensive impacts, which also include expanding the levy to currently exempt assets where FENZ services are less likely to be utilized.
Aircraft
Marine vessels docked at wharves or marinas, or tethered at sea
Crops and livestock situated far from fire stations
Water tanks and retaining walls typically not susceptible to fire damage
It's worth noting that several New Zealand airports maintain their own crash firefighting capabilities funded through landing fees. Levy application to search and rescue helicopters could also increase their insurance costs.
"Search and rescue helicopters often support FENZ with firefighting operations, so the levy might ultimately be passed back to FENZ through the fees charged for their services," IBANZ indicates.
FENZ stated that it will compile the feedback received to aid the Minister of Internal Affairs in making informed recommendations. The consultation paper’s submission period concluded last week.
Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.
In a significant shift within the Australian insurance landscape, NRMA has announced its withdrawal from the farm insurance market, ceasing the sale of new policies as of July 1, 2025. This decision affects both hobby and commercial farm insurance policies, leaving many farmers in search of alternative coverage options. - read more
Suncorp, a leading Australian insurer, has recently secured a substantial reinsurance agreement valued at AU$2.4 billion over a five-year period. This strategic move is designed to bolster the company's financial resilience and stability in the face of increasing natural hazard costs and a competitive insurance market. - read more
The Australian Prudential Regulation Authority (APRA) has recently imposed an additional AU$2 million capital requirement on Sovereign Insurance Australia (SIA). This decision comes in response to identified deficiencies in SIA's risk management framework and operational risk management practices. - read more
In a significant development for Australia's construction industry, Mecon, a specialist in construction insurance, has announced an increase in its underwriting capacity. Effective from March 10, 2026, Mecon now offers coverage up to $120 million for single projects under its material damage and public liability policy sections. This marks a substantial rise from the previous limit of $50 million. - read more
Mirabelle Underwriting, a specialist in construction and engineering insurance, has launched a new product tailored for renewable energy operations in Australia. This initiative, backed by Lloyd's capacity, aims to address the specific risks associated with the rapidly expanding renewable energy sector. - read more
Cyber Insurance is a type of insurance policy that protects businesses against internet-based risks and threats. This policy covers damages and losses caused by cyber attacks, such as theft of customer information, network downtime, and damage to reputation. - read more
In an age where digital presence intertwines with daily operations, the threat landscape in Australia has magnified, exposing businesses to an evolving array of cyber threats. From sophisticated phishing attempts to ransomware attacks, the risk of digital insecurity looms large. Australia, with its growing technological adoption, finds itself facing an upsurge in cyber threat incidents year over year. - read more
Cyber insurance is a type of insurance designed to protect businesses from internet-based risks and, more generally, from risks relating to information technology infrastructure and activities. It covers losses related to data breaches, cyber extortion, and other kinds of cyber attacks. - read more
Data breaches have become a significant concern for businesses in today's digital landscape. Simply put, a data breach occurs when sensitive, protected, or confidential information is accessed, disclosed, or used without authorization. The implications of such breaches can be far-reaching, affecting not just financial health but also the reputation of businesses and the security of individuals involved. - read more
Cyber threats refer to malicious acts that seek to damage data, steal information, or disrupt digital operations. These threats can come in various forms, such as malware, phishing attacks, ransomware, and more. - read more
Knowledgebase
Liability Insurance: Insurance that provides protection from claims arising from injuries or damage to other people or property
No comments yet. Be the first to share your thoughts.