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Speaker 1: The government's delaying a hike, as I was telling you earlier,

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Speaker 1: to its insurance levy. The hikes was supposed to go

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Speaker 1: up by about two to three hundred dollars from mid

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Speaker 1: next year. Nichola Willis has just announced she's going to

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Speaker 1: delay the rise by a year, so it'll kicking after

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Speaker 1: the election. Water Surprise Genative Trainee is The Herald's Wellington

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Speaker 1: Business editor and with us Hi Jena, why the delay.

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Speaker 2: Well, Nikola Willis told me that she's aware that, you know,

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Speaker 2: insurance premiums have been rising a lot in recent years.

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Speaker 2: They've really put households under pressure, and you know, she

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Speaker 2: doesn't want to add to that cost. She's also mindful that,

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Speaker 2: you know, if insurance premiums go up by too much,

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Speaker 2: then some households might water down their cover or get

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Speaker 2: rid of their insurance altogether, which then would cause an

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Speaker 2: even bigger problem for you know, New Zealand, for the

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Speaker 2: resilience of households. So look, I think that this issue

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Speaker 2: is pretty interesting. I became aware of it because the

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Speaker 2: Treasury reached out to insurance companies to let them know

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Speaker 2: that nothing would be done before mid twenty twenty seven.

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Speaker 2: So I don't know if the government was ever going

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Speaker 2: to announce this, but it has just quietly pushed the

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Speaker 2: can down the road. The issue is that the Natural

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Speaker 2: Hazards Commission does not have enough money to cover the

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Speaker 2: costs of a big disaster. So, you know, the Treasury

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Speaker 2: reckons these levees really do need to go up, but

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Speaker 2: of course no government minister, particularly this government, wants to

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Speaker 2: hike taxes effectively, if we're being political about it.

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Speaker 1: Yeah, so at the moment it has about six hundred

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Speaker 1: billion and it's kitty, right, What should it actually have

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Speaker 1: in order to cover a big event?

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Speaker 2: Yeah, so the reinsurance that the Commission has that only

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Speaker 2: kicks in if the costs exceed two point two billion dollars,

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Speaker 2: So anything below two point two for a certain event

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Speaker 2: needs to be covered by the Commission. But the Commission

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Speaker 2: only has six hundred million and it's kitty. So that

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Speaker 2: means if there is a big disaster, the Crown could

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Speaker 2: have to pay up to one point six billion dollars.

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Speaker 2: So the thing here is that effectively someone always has

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Speaker 2: to pay. The model we have the idea is that

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Speaker 2: it's sort of doesn't expose the Crown's balance sheet too much,

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Speaker 2: you know, it keeps the cost contained. You're a homeowner,

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Speaker 2: you pay the levees, you know, the levees attacked onto

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Speaker 2: your private insurance premiums, you pay levies, and then when

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Speaker 2: you need to pay out, you tap into this. But

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Speaker 2: you know, if more of the cost falls on the crown,

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Speaker 2: then that means the crown needs to borrow more and

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Speaker 2: the cost of that, you know, of covering homeowners is

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Speaker 2: covered by all of us people who don't own homes

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Speaker 2: as well, and the cost gets pushed out into the future,

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Speaker 2: you know, the future generations who then take on that debt.

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Speaker 1: So in the point that you've just made is that

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Speaker 1: at two point two billion, that's when the if the

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Speaker 1: cost exceeds that, that's when the reinsurers kick in because

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Speaker 1: it hasn't got enough money and it's kitty, we are

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Speaker 1: not going to miss out on this, right. The government

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Speaker 1: can top it up to two point two and then

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Speaker 1: we get the reinsurance.

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Speaker 2: Yes, the government can top it up. So it's just

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Speaker 2: you know, it's just a matter of who pays. Do

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Speaker 2: we all pay or do just homeowners pay?

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Speaker 1: Yeah, brilliant Jinnay, Thanks very much for really appreciate you

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Speaker 1: explaining that it's jen Nahib training the Heralds Wellington Business Editor.

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