Insurance brokers collect roughly $800 million in Fire and Emergency New Zealand (FENZ) levies each year on behalf of the government, without compensation. Three of New Zealand’s insurance peak bodies now say that arrangement should end.
The Insurance Council of New Zealand | Te Kāhui Inihua o Aotearoa (ICNZ) filed a formal submission in August 2026 calling for the insurance-based levy to be replaced entirely. The submission aligns ICNZ with both the Insurance Brokers Association of New Zealand (IBANZ) and the New Zealand Underwriting Agencies Council (NZUAC), which have each taken the same public position.
According to ICNZ’s published premium breakdown, the FENZ levy accounts for approximately 5% of a standard home insurance premium. Combined with the Natural Hazards Insurance (NHI) levy and GST, government charges account for roughly 43% of what a homeowner pays before any risk pricing is applied.
Across all products subject to the levy, ICNZ’s submission puts the FENZ component at approximately 9% of premiums.
ICNZ chief executive Kris Faafoi said the burden falls unevenly. “Insured households and businesses bear most of the cost through the levy, despite the benefits of FENZ being shared across the community. That is becoming increasingly difficult to justify,” he said.
Those figures land in a market already under pressure. Quashed’s Insurance Index recorded the average annual home insurance premium at $2,949 in Q2 2026 – up 34% over three years – with Wellington homeowners averaging $4,492.
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For brokers, the problem runs deeper than passing a levy line item to clients. A March 2026 client advisory from Arthur J. Gallagher confirms that brokers collect the FENZ levy as a charge separate from the insurance premium, on FENZ’s behalf – a function that requires system updates, legal reviews, and dedicated staff time with each levy change.
NZUAC executive director Paul Uprichard said at the NZUAC Auckland Expo that some members employ staff full time solely on FENZ levy administration, on top of ongoing system changes and legal reviews. Others are declining to bring new specialty product lines to market to avoid the compliance cost of bringing those products within the levy's scope.
Faafoi confirmed those costs do not stay within the industry. “The collection and administration of the levy imposes significant compliance costs on insurers, which are ultimately passed on to consumers,” he said.
The compliance load intensified from July 1, 2026, when the levy calculation for commercial property shifted from indemnity value to sum insured under the Fire and Emergency New Zealand (Levy) Regulations 2024.
At the consultation stage, IBANZ projected that levies for some commercial clients maintaining adequate cover could rise by up to 400%, with the total levy collected across the commercial property book expected to double, according to an IBANZ press release in May 2024.
Former IBANZ chief executive Mel Gorham was direct. “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,” Gorham said.
Property Council New Zealand, which has advocated for changes to the FENZ funding model for more than a decade, has argued that previous reforms retained the insurance-based levy rather than replacing it with an alternative funding model.
The equity argument compounds as the insured pool narrows. Consumer NZ data shows 17% of New Zealand households cancelled insurance cover in 2025 due to cost, up from 7% in 2022.
As coverage rates fall, the levy base concentrates further onto those who remain insured, increasing pressure on the very premiums pushing others out.
IBANZ chief executive Katherine Wilson described the arrangement as structural. “Access to FENZ services is quite rightly available to all New Zealanders, but those who pay insurance premiums are unfairly burdened with funding them,” she said.
A February 2026 Treasury Cabinet paper estimated home insurance uptake at between 83.7% and 95%, noting the data is limited, and recorded premiums growing at three times the rate of general inflation since 2011.
The parliamentary annual review of FENZ for 2024/25 confirms that 95% of FENZ’s total revenue of $838 million came from levies on property and vehicle insurance. The same review notes the levy base declined year-on-year for the first time in almost two decades, which FENZ attributed partly to reduced insurance volumes as the price of insurance rises.
ICNZ’s submission argues that the levy’s design no longer matches FENZ’s mandate. The organisation notes that FENZ today responds to vehicle accidents, medical emergencies, and civil defence events – not only fires – and that the public benefit of those responses is shared across the community, not only by those who pay insurance premiums.
ICNZ has proposed replacing the levy with general taxation or property and vehicle-based charges. Victoria made a comparable shift in July 2013, moving from an insurance-based fire services levy to a property-based model following a recommendation from the Victorian Bushfires Royal Commission, which found the arrangement lacked equity and transparency, according to the Victorian Country Fire Authority.
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The Department of Internal Affairs (DIA) was directed to report findings before the end of July 2026. As of publication, no public outcome has been released – meaning the structural debate and the immediate commercial reality are running on separate timelines. Levy rates are already locked for 2026-29, confirmed at a 2.2% increase after the government rejected FENZ's proposed 5.2% rise, per the Beehive.
“For many years there have been calls for a fairer and simpler approach to funding FENZ. We believe the time has come to move beyond an insurance-based levy and adopt a funding model that shares the cost of emergency services more fairly across the community,” Faafoi said.
