New Zealand’s insurance sector is set to bear a portion of the Reserve Bank’s regulatory costs under a new prudential levy announced in Budget 2026, shifting supervision funding away from taxpayers and on to the entities the central bank oversees. Finance Minister Nicola Willis confirmed the measure on May 28, framing it as consistent with how other New Zealand regulators already operate and with international practice in comparable markets. The levy will apply across banks, non-bank deposit takers, insurers, and financial market infrastructure providers. “This levy will ensure the cost of regulation and supervision is borne by financial market players rather than taxpayers,” Willis said.
The charge draws its authority from Section 296 of the Reserve Bank of New Zealand Act 2021, which permits the government to recover costs the Reserve Bank incurs in performing its prudential functions. Those functions cover the full lifecycle of entity oversight: licensing, issuing prudential requirements, supervising compliance, taking enforcement action, and managing the resolution of entities in financial distress.
The government estimates the levy will recover approximately $209 million over four years. Revenue collected will be paid to the Reserve Bank and returned to the government through an increased dividend. Government notes accompanying the Budget state the total is less than 1% of the combined profits of New Zealand’s four largest banks, a figure that signals the relative scale of the impost on the broader financial sector. Willis drew on overseas precedent to support the design. “It is also consistent with international practice in countries like Australia, Canada, and the United Kingdom,” she said.
Three categories of regulated entities will be liable. In the deposit-taking sector, there are currently 27 registered banks and 14 licensed non-bank deposit takers. New Zealand’s insurance market – spanning general, life, and health lines – has 81 licensed insurers. Five designated financial market infrastructure providers (FMIs) – which facilitate the clearing, settlement, and recording of transactions including payments, securities, and derivatives – are also within scope. Willis noted the model mirrors how the Financial Markets Authority (FMA) and the Commerce Commission already fund much of their activity, both of which recover costs through levies on the participants they regulate. “This mirrors the approach taken by the Financial Markets Authority and the Commerce Commission which fund much of their activity through levies on financial market participants,” she said.
The Budget announcement constitutes a decision in principle rather than an immediate regulatory obligation. Before the minister can recommend levy regulations to Cabinet, Section 296(1) of the RBNZ Act requires consultation with those liable to pay or significantly affected by the levy. Willis has requested the Reserve Bank carry out that consultation on her behalf, and the RBNZ has agreed. Three issues are on the consultation agenda:
The Reserve Bank has set the following timeline for the process. Consultation with the sector is scheduled to open in late July and run through October 2026. Cabinet will then consider final decisions in early 2027. Regulations are targeted to be made and gazetted between June and July 2027, with the levy taking effect in August 2027.
Of the three categories of entities subject to the levy, the insurance sector is the largest by number, with 81 licensed insurers operating across general, life, and health markets. How the levy burden is distributed across those entities – and between sectors – remains to be determined through the consultation process. The Reserve Bank’s prudential responsibilities over insurers include licensing, ongoing supervision, monitoring financial health, enforcement, and crisis management. Under the new framework, the cost of those activities will no longer rest with the government alone.
Willis situated the measure within a wider argument about financial system stability. “In a more unstable world, it’s important we strengthen the financial system, so it keeps working for Kiwis when times get tough,” she said. The late July consultation opening represents the primary opportunity to engage with the levy’s structure before Cabinet reaches its final position. Key questions – including how costs are split between general, life, and health insurers, and what calculation method applies – will be resolved during that period. Once Cabinet finalises its decisions in early 2027, the path to an August 2027 start date moves on a fixed schedule.
