The Treasury has launched a focused review of household insurance affordability and is pausing its existing review of the Natural Hazards Insurance (NHI) for the time being.
A Cabinet paper jointly released by Finance Minister Nicola Willis and Commerce and Consumer Affairs Minister Scott Simpson in January 2026 highlights the rationale of the decision and outlines the steps being taken to address the rising insurance premiums.
Insurance Premiums on the Rise
Home insurance premiums in New Zealand have grown at three times the rate of general consumer price inflation since 2011. According to the paper, premiums rose by 40% in just the last two years alone.
For homeowners in high-risk areas, such as those exposed to both earthquake and flood hazards, such as Wellington, Marlborough, and Canterbury, the increases have been even steeper.
While insurance remains largely available across the country, household access and affordability are becoming increasingly difficult in areas facing significant seismic and flood risk.
“Our government needs a better understanding of the extent, consequences and drivers of these increases in residential (house and contents) insurance.”
A Government-Ordered Review
In response, the Cabinet has been invited to commission the Council of Financial Regulators (CoFR), comprising the Reserve Bank of New Zealand, the Financial Markets Authority, the Commerce Commission, MBIE, and Treasury, to conduct a focused six-month review of the drivers of residential insurance pricing and affordability. The review is expected to report back to ministers by mid-2026.
The review would be:
Led by the Council of Financial Regulators, with input from other relevant government agencies.
Have substantive input from industry and other stakeholders
Invite the Commerce Commission to conduct an initial market assessment of the residential insurance sector.
Identify opportunities for policy work to address key issues.
Report back on initial findings after six months.
Pausing the NHI review
Separately, the Cabinet paper has called to “pause the NHI review until the affordability review is further advanced, so decisions on the NHC financial settings and levy settings can be aligned with any other policy decisions we take.”
The pause means the levy decision will be held off until insights from the broader affordability review are available, so that the government can address both of them in coordination.
Treasury noted that the current levy rate (16 cents per $100 of NHI building cover) is insufficient to fully cover the expected long-run costs of the NHI scheme. They have proposed raising the levy to 24 cents.
However, the Minister of Finance has decided to pause the NHI levy review, citing concerns about the impact of a further increase on the ongoing affordability of insurance for many Kiwis.
Key Takeaway
The Treasury’s new approach shows that there are multiple reasons for the rise in insurance premiums. Higher claims risk, rising construction costs, expensive international reinsurance, and potentially weak market competition are all contributing factors.
While the paper notes the various climate change adaptation efforts being carried out by the government, it also notes that these are long-term solutions. Businesses that require an affordable insurance solution should review their current policy and speak with a broker who can tailor the right insurance to their needs.
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