Earthquake Commission (EQC) Levy To Increase – From 1 November 2017 Previous item Important Information... Next item We Have Good News For You!

The Government has announced an increase to the Earthquake Commission levy as part of Budget 2017.

Under the changes, EQC’s premium will be raised to 20 cents per $100 of cover, from 15 cents per $100 of cover, from 1 November 2017.

The increase will assist in rebuilding the Natural Disaster Fund which has been depleted as EQC settles its liabilities including the Canterbury and Kaikoura earthquakes.

It also ensures that EQC Cover continues to support high levels of insurance in New Zealand and provide first loss insurance cover for residential dwelling, contents and land damage for New Zealand households.

More information on the Budget announcement regarding changes to the EQC levy is available at The joint Minister’s media statement is online.

The EQC premium or levy is paid by all holders of house and/or contents fire insurance policies and contributes to EQC’s earthquake and other natural disasters cover, which covers the first $100,000 (plus GST) of house damage, the first $20,000 (plus GST) of contents damage and damage to associated residential land, which is not covered by private insurers. The levy is paid at the time your private insurance is paid, and your insurer passes it on to EQC.

What has changed?

The EQC premium rate that householders pay as part of their overall insurance premium will rise from 15c per $100 of insurance cover to 20c per $100. Insured householders will pay a maximum of $276 (including GST) a year, up from the current maximum of $207.

When will the change take effect?

The change will be introduced in regulation and will come into effect on 1 November 2017.

How will the change impact householders?

For those householders that have full cover for both buildings ($100,000) and contents ($20,000) the increase in the annual premium paid will be $69 including GST.

The earthquakes in Canterbury and Kaikoura demonstrated the importance of the EQC scheme in providing insurance cover and financial assistance to New Zealanders following a natural disaster.

Why has the rate changed?

EQC has two sources of income premiums and investment income from money held in the Natural Disaster Fund. The current EQC premium rate of 15 cents is below the long-term breakeven costs of running the scheme. EQC has had to meet the cost of settling claims for events including Canterbury and Kaikoura and therefore the Natural Disaster Fund needs to be rebuilt.

Once EQC has settled all of its existing claims, at the current premium rate it would take more than 30 years to rebuild the Natural Disaster Fund to $1.75 billion, which is the amount EQC needs to pay as its “excess” on its current reinsurance programme. Raising the premium rate to 20 cents will assist EQC in meeting its long-term costs and rebuilding the Natural Disaster Fund to this level within 10 years.

The levy is being increased by the minimum amount possible that will put EQC on a more sustainable footing for the future.

What does EQC use its premium income for?

The premiums that EQC receive are used to pay for the annual operating costs of EQC, which includes:

  • the purchase of EQC’s $4.7 billion reinsurance programme;
  • the settlement of claims arising from smaller scale natural hazard events such as the recent Edgecumbe floods;
  • providing funding for GeoNet;
  • research into natural hazard risks and potential mitigation; and
  • Public education to increasing community preparedness and resilience to natural disasters.

EQC’s ongoing investment in research, including GeoNet, increases our knowledge and preparedness to respond to natural hazard events and reduces uncertainty for international reinsurance markets which continue to provide cover for New Zealand.

Any annual surpluses are invested into the Natural Disaster Fund. The Natural Disaster Fund, along with EQC’s current $4.7 billion reinsurance programme and the underlying Government guarantee are in place primarily to meet the potential costs of large-scale natural hazard events such as the Canterbury and Kaikoura earthquakes.

How will this affect my private insurance policies?

The EQC premium will increase and you pay this as a separate fee when you pay your private insurance premium.

Is the EQC running out of money to pay claims?

EQC’s Crown guarantee means it can meet its earthquake and other claims regardless of whether the premium rate is raised or not. However, raising the premium rate reduces the amount the Government is likely to have to pay under the guarantee in future.

The Government believes it is better for insured householders, who directly benefit from EQC’s cover, to pay a premium that reflects EQC’s long-term costs, rather than all taxpayers effectively subsidising EQC.


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