October 2022 will bring Earthquake Commission changes

There are some changes on the horizon for home insurance policies, body corporates and the residential component of commercial buildings. The changes relate to the Earthquake Commission (EQC) Cap and Levy.

EQC Cap

If your home is damaged or destroyed by a natural disaster (such as earthquake, tsunami and natural landslip), currently the Earthquake Commission provides cover for it to be repaired or replaced up to $150,000. This portion of cover is referred to as the EQC Cap.

Effective from 1 October 2022, the Government is increasing the EQC Cap from $150,000 to $300,000 (excluding GST).

EQC Levy

To enable the Earthquake Commission to increase their cap, they are increasing the EQC levy you currently pay in your insurance from $300 to $480 (excluding GST). The Government’s intention is to keep insurance affordable in high seismic areas.

What this means for you

To ensure affordability and sustainability of earthquake cover in the areas most exposed to earthquake (high seismic areas), insurers are now looking to redistribute some of these costs to areas where there is lower earthquake risk eg Auckland and other parts of New Zealand, to help share the load.

Each insurer will determine their pricing strategy in response to the EQC change and unfortunately there is no ‘one size fits all” approach.

Earthquake prone areas such as Wellington, Canterbury and Hawkes Bay have to date carried a disproportionate share of the Earthquake pricing and this is set to change with a redistribution of cost across all areas.

If you have any questions, please contact your local broker.