Insurance brokers have expressed concerns about proposed changes to the Fire and Emergency New Zealand (FENZ) levy, suggesting that the new calculation method could lead to significantly higher costs for commercial property owners, potentially resulting in some properties being left uninsured.
FENZ recently closed its consultation on levy rates, which are set to take effect from 2026. A key change in the proposal is the shift from calculating the levy based on the indemnity value of commercial buildings to using the sum insured.
Mel Gorham, CEO of the Insurance Brokers Association of New Zealand (IBANZ), pointed out that the indemnity value of older or poorly maintained buildings can be as low as 25% of the sum insured, indicating a significant difference in valuations.
With the rising value of buildings, IBANZ members have indicated that levies could increase by up to 400% by July 2026 to ensure adequate insurance coverage. They added that the total levy collected from commercial properties is expected to double under the new calculation method.
Gorham suggested that a reduction in the levy rate is necessary to reflect this change, but said that the proposed 4% decrease is insufficient.
“IBANZ members are already seeing clients cancel or reduce cover as they manage the effects of prolonged high inflation and increased insurance costs. This change will clearly impact premium affordability and lead to more under insurance or decisions not to insure at all,” she said.
She also raised concerns that many commercial property owners may not be aware of the significant impact of the proposed changes.
“Levies on many commercial buildings are already hundreds of thousands of dollars, so the impact is substantial, and the costs will end up being passed onto customers,” she said.
IBANZ also highlighted that the new proposal would bring certain currently exempt categories under the levy, despite the low likelihood of requiring FENZ services. This includes marine vessels, crops, and livestock, which are often located in remote areas far from fire stations.
Additionally, items like water tanks and retaining walls, which are typically not affected by fire, would lose their exemptions.
From 2026, the FENZ levy will also apply to aircraft operating within New Zealand. New Zealand insurance brokers place almost all aviation insurance in international markets, with insured values for commercial aircraft often exceeding US$100 million.
IBANZ argues that FENZ will collect disproportionately high levies given that most New Zealand airports are required to provide their own firefighting capabilities, funded through landing fees. Aircraft incidents outside of airport environments typically occur in remote areas, less accessible to FENZ.
The change would also affect search and rescue helicopters and emergency response light aircraft, currently exempt from the levy. Applying the proposed levy to a $10 million insured aircraft would add approximately NZ$11,000 to annual insurance costs. These aircraft often assist FENZ in firefighting, meaning the levy cost might be passed back to FENZ through service fees.
In a recent statement, the Aviation Industry Association has slammed the FENZ’s proposal to extend its fire insurance levy to include domestic aircraft.
While IBANZ supports well-funded emergency services, it remains concerned about the sustainability of the FENZ funding model.
“FENZ is almost exclusively funded by those who buy insurance despite a much wider group of stakeholders benefiting from its services. Any reduction in the pool of policyholders due to affordability will only exacerbate the inequity,” the association said.
