The New Zealand government has ordered a review of how Fire and Emergency New Zealand is funded, with the Department of Internal Affairs directed to report back before the end of July 2026. The Insurance Council of New Zealand has welcomed the move - but its backing comes with an urgent addendum: the levy model under review is not simply inequitable, it is structurally self-defeating.
The share of New Zealand households without insurance rose from 7% in 2022 to 17% in 2025, according to Consumer NZ survey data, and insurance now ranks among the top four financial pressures for New Zealanders alongside housing, food and household debt. A levy collected through insurance premiums depends on a broad insured population - and that population is shrinking.
The review will not affect levy rates, which have already been set for the next three years from 1 July 2026 - meaning the structural debate and the immediate commercial reality are running on different timelines.
The FENZ levy has funded fire and emergency services through insurance premiums since 1975. Under the current model, 95% of FENZ's income comes from levies on property insurance policies - a design that made sense when FENZ was primarily a fire service. From July 2025 to March 2026, only 59% of incidents FENZ responded to were fire-related, according to government data. The remainder covered medical emergencies, maritime incidents, severe weather events and false alarms.
Minister of Internal Affairs Brooke van Velden said the 1975 model was no longer fit for purpose. "Given the widened mandate, there is a valid question about whether this model is fair for levy payers and fit for purpose," she said.
The DIA has been asked to consider two specific alternatives: direct Crown funding, or a rates-based collection model that would spread the cost across more people at a lower individual rate.
The FENZ levy collected close to $800 million in the 2024-25 financial year, according to ICNZ. Brokers and insurers calculate, collect and remit those sums to FENZ without compensation - a disproportionate administrative burden given that IBANZ estimates its members place around half of all insurance written in New Zealand. That obligation does not change in the short term regardless of the review's outcome.
ICNZ chief executive Kris Faafoi said continued reliance on the FENZ levy risks compounding the affordability problem over time. "When premiums rise, there is a real risk people reduce their cover or go without it altogether. That has broader consequences for individuals, communities and the wider economy," he said. Fewer insured households means a shrinking pool of FENZ levy payers, concentrating the funding burden on those who remain insured and, over time, risking the sustainability of the model itself.
ICNZ has gone further than welcoming the review. It has separately proposed replacing the FENZ levy with a Community Protection Levy, under which FENZ would shift to direct Crown funding and the freed-up levy revenue - estimated at $600 million to $700 million annually - would be redirected toward natural hazard risk reduction including flood protection and coastal resilience. "Our proposed Community Protection Levy is a practical option to help fund large-scale risk reduction," Faafoi said.
The government has not backed the proposal. Finance Minister Nicola Willis rejected it at the ICNZ annual conference in early June 2026 - days before van Velden directed the DIA review. "Having a specific levy to achieve that, I don't think is necessary if you have prudent Government investing in infrastructure," Willis said.
The DIA's findings will inform any future regulatory or legislative changes to fire and emergency funding, but no timeline for legislation has been set. For brokers and underwriters, the July 2026 levy rate changes already in effect are the immediate practical reality - the structural question of who should pay for FENZ, and how, remains unresolved.
