Insurance-based levy to fund Fire and Emergency New Zealand

Implementing a new insurance levy to fund Fire and Emergency from 2026

A redesigned levy on insurance will fund Fire and Emergency from 1 July 2026. It will apply to insurance contracts covering loss or damage from fire, and to contracts of insurance covering motor vehicles (see Fire and Emergency NZ funding review for information about recent changes to the Fire and Emergency Act 2017).

Levy rates will determine the amount of fire levy payable on insured property. For motor vehicles, a flat levy amount will apply. For other insured property, the levy will be a defined proportion of the insured value. Levy rates and exemptions from paying the levy will need to be set in regulations for the new levy to operate.

The Government has decided on levy rates to apply from July 2026 

In September 2024, the Government made policy decisions on levy rates and administrative matters for the new levy. The Minister of Internal Affairs’ announcement of these decisions is available on the Beehive website: New levy rates set to ensure continued funding of FENZ (19 September 2024). Cabinet material related to the decisions on levy rates and administrative matters is available here: Proposals for Fire and Emergency levy rates and other levy matters [Proactive Releases]. The Department’s Regulatory Impact Analysis that was an input into the Government’s decisions is available here: Regulatory Impact Statements and Assessments. Regulations will be made in December 2024 to enact these decisions.

Levy rates were assigned based on the proportion of time and resources used by Fire and Emergency in responses to each type of property. The following rates and caps will apply to the different property types from 1 July 2026:

• Motor vehicle owners will pay an annual levy amount of $25, up from $9.53 currently and up from $0 for third party only cover;
• Homeowners will pay a maximum annual amount of $107.40, down from $119.50 currently (the new maximum annual amount is based on a residential property levy rate of 10.74 cents per $100 sum insured and a cap of $100,000);
• The maximum annual amount to pay on contents policy will be $21.48, down from $23.90 currently (the new maximum annual amount is based on a personal property levy rate of 10.74 cents per $100 sum insured and a cap of $20,000); and
• A general non-residential property levy rate of 7.76 cents per $100 sum insured, without a cap on the value levied.

Specific rates and caps will apply to certain types of property:

• A rate of 7.76 cents per $100 sum insured, capped at $100,000, for any aircraft that flies in New Zealand (maximum annual levy payment of $77.60 per aircraft);
• A rate of 1.94 cents per $100 sum insured for forests (25% of the general non-residential rate);
• A rate of 1.94 cents per $100 sum insured for livestock (25% of the general non-residential rate); and
• A rate of 3.88 cents per $100 sum insured for any property under a contract works policy (50% of the full non-residential rate).

Decisions were informed by the feedback received by Fire and Emergency on levy rates proposals

Fire and Emergency led public consultation on the activities it intends to carry out, and the levy rates it proposed to meet its revenue needs for a three-year period from 1 July 2026. The Cabinet paper related to levy rates consultation is available here: Approval to consult on levy rates for the Fire and Emergency levy [PDF]. Public consultation on levy rates ended on 17 May 2024.

The Minister of Internal Affairs asked for further evidence before final levy rate decisions were reached

The Minister of Internal Affairs wrote to Fire and Emergency in April 2024, outlining her expectations for further information before the Government made final levy rate decisions.

The letter is available here: Letter to Fire and Emergency Chair from the Minister of Internal Affairs [PDF, 254KB]

The Government also made changes to the levy exemptions that will apply from July 2026

The Government decided the types of property to be exempt from paying the new levy earlier this year. These decisions were informed by feedback from insurers and levy payers in 2022 and 2023.

Further consideration was given to some of the exemptions decisions following consultation on levy rates. In September 2024, the Government amended three of its earlier decisions on exemptions, as follows:

• Reintroduce the exemption for marine vessels and extend this exemption to marine vessels stored on land, due to the limited benefit received from Fire and Emergency;
• Reintroduce the exemption for roads, bridges, streets, paths and tunnels, as the costs are covered in the motor vehicle levy; and
• Amend the exemption for aircraft that fly internationally by not requiring that they fly ‘regularly’ internationally.

The updated list of property that will be exempt from 1 July 2026 is as follows: 

• New Zealand Defence Force property;
• mines and tunnelling operations;
• reservoirs, dams, drains or channels;
• offshore installations;
• cabling and pipelines on the sea floor, breakwaters, moles, and groynes;
• art and collections held by cultural heritage bodies;
• ships that are registered internationally;
• aircraft that fly international routes;
• goods insured for import and export;
• marine vessels; and
• roads, bridges, streets, paths and tunnels. 

Three classes of insurance contract will also be exempt from the levy:

• insurance for war and terrorism risks, where the property is also insured under an all-risks policy;
• deductible buydown insurance;
• insurance covering existing property as part of contracts works policy.

Reasons for exemptions to the new levy

The reasons for exemptions are summarised below. These reasons align with the principles of the levy in section 80 of the Fire and Emergency New Zealand Act 2017. The Cabinet paper related to the exemptions decisions from earlier this year is available here: Proposals for exemptions to the Fire and Emergency levy [PDF, 1MB].This Cabinet paper is to be read in light of the three further amendments subsequently made in September 2024, with the updated list of exemptions outlined above on this website. The Department’s Regulatory Impact Analysis that was an input into the Government’s decisions is available here: Regulatory Impact Statements and Assessments.

1. Insurance policyholders that cannot benefit from Fire and Emergency services should not pay levy 
   Some policyholders receive little or no benefit from Fire and Emergency services. For example, Fire and Emergency can respond to most New Zealand incidents but is unable to respond to property located at sea. Some organisations also have separate emergency responses that limit their reliance on Fire and Emergency.
2. The levy should not be charged multiple times on the same property
   The exempted classes of insurance contract are often purchased for property already covered by standard fire cover contracts. Exempting the three classes of insurance contract ensures the levy is not charged twice on the same property. 
3. How the levy applies to property travelling in and out of New Zealand must be clear
   Exemption decisions clarify that international property that may be temporarily located within New Zealand’s borders (such as ships, aircraft or cargo) should not pay levy, even if its owners receive some benefit from Fire and Emergency while here.

 

The new levy will replace the transitional levy

The fire levy that applies from 1 July 2026 will replace the transitional levy. The current levy is a temporary funding solution for Fire and Emergency that is based on the funding system for the former urban fire service. Various property types, such as forestry, are exempt from paying the transitional levy. Fire and Emergency provides a broader range of services compared to the urban fire service, so it is appropriate to end some of the exemptions from that transitional levy scheme when the fire levy takes effect from 1 July 2026.

The Fire and Emergency transitional levy was adjusted in July 2024

Fire and Emergency has been primarily funded by a transitional levy since the organisation was established in 2017. The transitional levy is a levy on insurance contracts and will continue until the new levy replaces it in July 2026 (see Fire and Emergency NZ funding review for more information on the new levy).

The transitional levy rates increased on 1 July 2024. This change will help meet the costs of the Collective Employment Agreement between Fire and Emergency and the New Zealand Professional Firefighters’ Union, signed in December 2022.

The transitional levy rates increased by 12.8 per cent flat rate for all levy payers. This means that from July 2024:

• A household with coverage of their contents and one car pays $4 more per year on their insurance premiums.
• A household with coverage of their home, contents and two cars pays $18.50 more per year on their insurance premiums.

The regulations that outline these changes can be found here: Fire and Emergency New Zealand (Levy Rates and Information Requirements in Transitional Period) Amendment Regulations 2023 (Legislation website). Updated guidance for insurers and other levy payers can be found on the Fire and Emergency website at Fire and Emergency levy rate (Fire and Emergency New Zealand website).