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.
Quay Marine Insurance has been appointed as a Coverholder for XL Insurance Company SE (XLICSE), a subsidiary of AXA XL, marking a significant milestone in its mission to provide tailored marine insurance solutions across Australia. - read more
Insurance Australia Group (IAG) has reached a confidential settlement in the $4 billion lawsuit initiated by Greensill Bank AG and its insolvency administrator. This legal action stemmed from disputes over insurance coverage related to Greensill's financial products. - read more
A recent analysis by Macquarie has revealed a significant decline in the domestic business package market share held by Australian insurers, dropping to approximately 48% in the fiscal year 2025 from nearly 67% a decade ago. - read more
Suncorp has successfully secured up to AU$2.4 billion in reinsurance protection over five years, leading to a significant 10% increase in its share value. This strategic move is expected to bolster the company's fiscal 2026 growth outlook, with projected gross written premium growth of 3% across its Australia and New Zealand operations. The reinsurance arrangement, effective from June 30, is designed to cap natural hazard costs in approximately 90% of scenarios, thereby reducing earnings volatility. - read more
The Australian cosmetic nursing industry has experienced significant growth, driven by increasing demand for non-surgical cosmetic procedures such as injectables and skin treatments. This expansion has led to heightened scrutiny and the implementation of new regulations aimed at ensuring patient safety and professional accountability. - read more
Cybersecurity refers to the measures and practices put in place to protect digital information and systems from attacks, unauthorized access, damage, and disruption. - read more
Cyber risk management involves identifying, assessing, and mitigating risks related to digital and online threats. These threats can include unauthorized access to sensitive information, data breaches, and other malicious activities targeting an organization’s digital infrastructure. - read more
In today's digital age, understanding the cyber threat landscape in Australia is not just important—it's essential. Cyber attacks are becoming more sophisticated and are affecting businesses and individuals at an alarming rate. Common types of cyber attacks include phishing, ransomware, and data breaches, each with the potential to cause significant harm. The impact of cybersecurity breaches on both the economy and the reputation of affected entities is profound, ranging from financial loss to long-lasting reputational damage. - read more
Cyber insurance, also known as cyber liability insurance, is a type of coverage designed to protect businesses from the financial repercussions of cyber attacks and data breaches. As cyber threats become more sophisticated, the need for a safety net to mitigate the impact of such incidents has grown significantly. - read more
In today's rapidly evolving digital landscape, Australian businesses face an ever-increasing array of cyber threats. From sophisticated phishing schemes to ransomware attacks, these dangers lurk in the virtual shadows, often going unnoticed until it's too late. Recognizing and understanding these cyber risks is not just important; it's crucial for the sustainability and success of any modern enterprise. - read more
Knowledgebase
Moral Hazard: The concept that individuals may take on more risk when they do not bear the full consequences of that risk, often relevant in insurance scenarios.
No comments yet. Be the first to share your thoughts.