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                                       Earthquakes & Fire Service Levies

Welcome to our November newsletter edition & an extremely interesting time for our industry. Obviously, a major piece of news recently is the EQ centred around Marlborough & North Canterbury.  On the insurance side, we have another major catastrophe which has effected international reinsurers, many of whom still have ongoing memories of six years ago & are still paying for the last lot of major earthquakes.  It is hard to know how this will affect the insurance industry in the long term but we can be comforted by the fact most NZ insurers are in good shape & have a robust backing which can support a loss of this size. 
It is a difficult & uncertain time for many individuals & businesses in the aftermath of the Kaikoura earthquakes. Whilst we have had many calls & emails notifying us of damage, we are totally focused on ensuring our clients receive the best possible claims service so they can be up and running as soon as possible.
Understandably we have also had enquiries asking what our underwriting position is going forward. I have always recognized we are a contingency business & have been available for a multitude of enquiries, especially regarding insurer embargoes which are often imposed upon us by insurers at such times of underwriting uncertainty.
While most insurers are not looking to increase their exposures in the Wellington, Marlborough and Nelson regions we will continue to support you our clients & provide the best terms & coverage we are able to. Continuing to support our current clients is our key focus until some level of normality returns. In this trying environment, we do have facilities in place through London insurers if required.
Another extraordinary development in recent weeks effecting our industry is with regards The Fire and Emergency New Zealand (FENZ) Bill, which is due to come into force on July 1st 2017.

One purpose of the FENZ Bill is to combine the urban and rural fire brigades. Urban fire brigades are currently funded by a fire service levy (FSL) being charged on insurance policies under the Fire Services Act 1974.

The cost of the merger of urban & rural fire brigades has been reported by Minister Peter Dunne to be $303 million. Levy payers are to fund $263 million of this through FSL being charged on their property, motor, contract works and home and contents insurance policies.

To fund the cost of the merger & the ongoing costs of the rural fire brigade, previously funded by local councils & other sources, the rate of fire service levy, for non-residential assets, is proposed to increase from the current rate of 7.6c per $100 insured to 10.6c per $100 insured (an additional $3,000 per annum per $10 million of insurance cover), an increase of 40%. The motor vehicle rate will increase from $6.08 to $8.45 per vehicle under 3.5 tonnes.

Additionally, the maximum fire service levy, for residential assets, will increase from $76.00 to $106.00 per house and for contents from $15.20 to $21.20 per household.

This increase will impact all clients who have insurance policies which attract fire service levy from July 1st 2017.

Details of the proposals are available at submissions on the proposed changes are welcome and the close date is Wednesday 30 November.

I will personally be completing a submission, on behalf of our clients in our role of representing your interests. This additional tax in my view is simply unfair & continues to take absolutely no cognizance of the many people who are uninsured & therefore receive the services for free, whilst the rest of us pay…  :-(

Looking ahead, from July 1st 2018 the proposed FENZ Bill changes what the fire service levy is to be charged on, introduces increased penalties for late payment, provides the Fire Service with increased auditing powers, introduces penalties for anything the Fire Service deems to be an anti-avoidance arrangement.

Any earthquake or FSL queries, enquiries welcome.
Otherwise, we trust all is well & look forward the better weather we are beginning to now enjoy. Until next time with our best wishes for warm summer weekends.
My regards,


Kenn Butler
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