NSW insurers and brokers are heading into another underwriting cycle with a concrete number on what legislative inaction is costing: the Emergency Services Levy (ESL) will draw $1.5 billion from NSW households and businesses in 2026-27 alone – a 66%increase over five years – and insurance taxes including stamp duty will exceed $3 billion a year across the forward estimates. The Insurance Council of Australia (ICA), citing the 2026-27 NSW Budget, puts the cumulative overrun at more than half a billion dollars above last year’s government forecast over the next four years. For brokers and underwriters pricing risk in the current cycle, that number is not just a policy statistic. It is a structural cost embedded in every NSW premium – in a state that remains the only mainland jurisdiction where emergency services are funded primarily through insurance premiums rather than a broad-based property charge.
The category-level data Revenue NSW published for 2024-25 illustrates how unevenly that obligation falls. General property insurance carries an 80% contribution proportion against approximately $2.9 billion in total premium. Motor vehicle and motorcycle insurance – the largest category by premium at approximately $7.2 billion – sits at just 2%. The levy currently adds approximately 34% to commercial property premiums before stamp duty is applied, against 18% on typical home insurance premiums.
That disparity is a direct function of the levy’s connection to property risk, and it makes the ESL a material line item in every commercial property conversation – one that shapes sum insured advice, coverage decisions, and ultimately whether clients hold adequate cover at all. The levy is collected under the Emergency Services Levy Act 2017, with the gazetted contribution target set at $1,511,742,400 for 2026-27.
The reform debate has moved beyond whether to replace the levy. An options paper released in April 2026 outlines a framework built on tiered fixed charges applied to a revenue base of land values. Under this model, the funding obligation would shift from insurance premiums to a property-based levy applied across all landowners – meaning insurers would no longer act as the primary collection mechanism for emergency services funding, and the ESL component would be removed from premium calculations entirely.
Modelling based on 2023-24 data indicates that around 55% of insured properties would have paid less under a replacement levy across all five options presented, with insured residential property owners saving an average of $65 per year. The stated objectives include reducing insurance costs for households, protecting pensioners and vulnerable community members, and ensuring a revenue-neutral outcome for emergency services funding.
A move to a land-value base would remove the ESL component from commercial property premium calculations entirely, materially changing the cost structure for commercial underwriting and the advice intermediaries give clients on sum insured and coverage levels.
The ICA’s case against the current structure rests on more than cost. ICA CEO Andrew Hall has framed it as a structural inequity with direct consequences for coverage levels: emergency services benefit the entire NSW community, but the funding obligation falls only on those who hold policies. “Everyone in NSW benefits from the hard work of our emergency services, yet only those who buy insurance pay for them,” Hall said.
The practical consequence, the ICA argues, is a direct disincentive to hold cover – a loading of this magnitude pushes households and businesses to reduce or drop insurance, widening the underinsurance gap the industry is already working to address in a state still absorbing the cost of successive flood and fire events. For brokers who regularly encounter clients making coverage decisions on price, it is an argument with immediate practical weight. One open question for those advising local government clients: council contributions currently account for 11.7% of fire and emergency services costs in NSW, and how that share would be treated under the replacement model has not been resolved through the inquiry process.
Despite the NSW government committing to overhaul the ESL in November 2023, no legislation has followed. A parliamentary inquiry is currently examining the proposed replacement framework. Treasurer Daniel Mookhey has described it as “an important step in moving funding for emergency services to an equitable and sustainable footing that cuts the cost of insurance,” but no legislative timeline has been set and final design decisions remain some way off.
Hall was direct on what the budget figures mean: “Today’s Budget puts a number on the cost of leaving the job of reforming the ESL unfinished. The cost of the ESL to insurance policyholders over the next four years will be half a billion dollars more than previously forecast in last year’s budget.” The equity argument sharpens that further: a funding mechanism that charges only the insured to protect everyone is, by design, a disincentive to hold cover – and one the industry has been waiting three years for parliament to dismantle.
For the industry, the absence of a timeline is itself a material planning variable. Another underwriting cycle will be priced, and client conversations about ESL exposure will continue, without certainty about when the structural conditions will change.
