However, Treasury last month wrote to insurers to say ministers were still considering what to do and no changes would be made until at least mid-2027. <\/p>\n
Finance Minister Nicola Willis explained she didn\u2019t want to make a hurried decision, as she was mindful private insurance premiums had risen dramatically in recent years.<\/p>\n
\u201cIt\u2019s a major cost of living pressure,\u201d she said.<\/p>\n
Asked whether she was simply kicking the can down the road, Willis said she didn\u2019t want to play a part in making insurance unaffordable, possibly to the extent some home owners ditched their cover.<\/p>\n
\u201cThat\u2019s not good for the resilience of the economy,\u201d she said.<\/p>\n
The way the Natural Hazards Commission works is all home owners with private insurance pay levies into a fund, which is used to settle claims for residential buildings and land damaged in natural disasters.<\/p>\n
Because the commission\u2019s cover is capped, costs home owners face above its limits can be covered by their private insurers. <\/p>\n
If the cost of all claims related to a certain event exceeds $2.2 billion, the commission can tap into the $10.3b of reinsurance cover (including a catastrophe bond) it has.<\/p>\n
The problem is, it only has about $600 million in its kitty. So, in the event of a major disaster, it would need the Crown to step in with up to $1.6b before it could use its reinsurance.<\/p>\n
The last time the commission relied on its reinsurers was after the 2010\/11 Canterbury Earthquakes, when it used $5b of reinsurance cover.<\/p>\n
It has struggled to replenish its coffers ever since. Indeed, reinsurance costs have soared, as has the cost of building.<\/p>\n
So, if there was a massive disaster tomorrow, the Government would need to issue more debt to get the funds to help the commission settle its claims. <\/p>\n
The cost of this would effectively fall on all New Zealanders today and into the future, rather than existing home owners.<\/p>\n
Nonetheless, Willis assured she believed in the Natural Hazards Commission model.<\/p>\n
She pointed the finger at the previous government for not doing its bit to ensure the scheme was \u201cfully funded\u201d.<\/p>\n
Until recently, Willis had joint responsibility for the commission with Associate Finance Minister David Seymour. <\/p>\n
However, Seymour passed the delegation on to Willis, saying that having two decision-makers was overly complicated and slowed the decision-making process.<\/p>\n