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.
Specialty insurer Newline Group has announced the opening of a new office in Sydney, marking a significant expansion of its Australian operations. This strategic move aims to bring the company closer to its distribution partners and clients in the region, enhancing service delivery and fostering stronger relationships. - read more
Markel Insurance has unveiled a suite of financial institution products specifically designed for the Australian market, featuring localized policy wordings to better address the unique needs of local businesses. This initiative reflects Markel's commitment to providing tailored insurance solutions that resonate with the specific requirements of Australian financial institutions. - read more
A recent survey conducted by KPMG has unveiled a significant shift in the expectations of Australian CEOs regarding office work. The findings indicate that only 22% of those surveyed anticipate a full-time return to the office for corporate employees within the next three years. This marks a substantial decrease from the 82% reported in the previous year, signaling a notable change in leadership perspectives on workplace dynamics. - read more
Insurance Australia Group (IAG) has recently submitted its recommendations to the Federal Parliamentary Joint Committee on Corporations and Financial Services, focusing on the Inquiry into Small Business Insurance. In its submission, IAG outlines how small business insurance operates across its retail and intermediated channels and provides recommendations to support stronger, more sustainable outcomes for small businesses in Australia. - read more
The Australian Securities and Investments Commission (ASIC) has ordered 11 insurance companies to refund a total of $815 million to customers following an investigation into pricing failures and governance issues. The investigation revealed that these insurers engaged in complex and reckless pricing models, lacked appropriate governance systems, and failed to adequately monitor and control their distributors, leading to millions of customers being overcharged. - read more
Cyber risk management involves identifying, assessing, and prioritizing potential risks to an organization's digital assets and implementing measures to mitigate these threats. - read more
In this digital age, online liabilities have become a crucial concern for individuals and businesses alike. At its core, an online liability refers to the potential risks and responsibilities associated with using the internet. These risks can range from data breaches to financial theft, and they have significant implications in our increasingly connected world. - 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
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
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
Knowledgebase
Peril: A specific risk or cause of loss covered by an insurance policy, such as fire, theft, or flood.
