Brokers across the Tasman could find themselves being accused of failing to give proper advice after millions of dollars of New Zealand fire levies have been found owing from overseas companies.
A review of overseas-registered companies with assets in New Zealand revealed hundreds of companies had assets insured under a global policy created in Australia, and had not been told by their broker of their New Zealand liabilities.
Some of them are now facing six years of outstanding levy payments, which, once penalties and interest have been included, could vary between thousands or millions of dollars, depending on the size of the company’s assets.
The outstanding payments would have been higher but legally the Fire Service could only go back six years under the Statute of Limitations.
A spokesman for the New Zealand Fire Service said Australian brokers should properly inform themselves of the regulatory environment their clients operate in so as to give the best advice possible.
NZFS chief financial officer, Brett Warwick, said while the onus and ultimate responsibility is on the company to pay the levy, questions could be asked of the broker for not advising them of it.
“If they’re operating outside their own country a broker needs to understand the regulatory environment in which they’re operating in and therefore give their clients the advice the best advice possible.
“Where that doesn’t happen and they’re surprised by what the outcomes are then that’s when the trouble comes, and not just for us but the client and the broker as well.
“Ultimately we go back and approach the client so it’s quite open as to what the situation is and how that arose. I suspect a lot of discussion takes place behind closed doors after that!” he added.
Warwick said in some cases the amounts had been over million, and for some $10,000, with the amount being relative to the organisation.
“We have the penalty regime which has two components – there’s an interest charge of 1.5% per month and a surcharge of 10% every six months so it doesn’t take much for the levy to double.
“However, I make sure I’m consistent and fair in terms of applying penalities and surcharge so quite often the amount is relative to the organisation.
“$1m might not be as much to some but it does still hurt and it does come as a big surprise.”
CEO of the National Insurance Brokers Association of Australia, (NIBA), Dallas Booth, said they broadcast information like this when they become aware of it using their news
letter but refused to say if any brokers had been hauled over the coals.
When asked what measures are now being taken to ensure brokers know about extra charges such as these, he implied the onus was on the NZ Fire Service to do so. He said: “I am not sure what other steps the NZ Fire Service might be taking to bring these obligations to the attention of overseas insurance brokers.”
The Insurance Brokers Association of New Zealand (IBANZ
) CEO Gary Young
said the revelations served as a timely reminder to all brokers to be clear of their clients’ obligations when operating in other territories.
“It’s always going to be hard to ensure offshore brokers remember the levies of each locality,” he said. “Here it happens in reverse – the New Zealand brokers have to remember about the fire levies in Australia. It’s less of an issue now there are only a couple of states left who haven’t put it onto the rates. So it’s gradually becoming less of an issue the other way.”