The New Zealand government has indicated it may consider measures on insurance affordability as premium growth and localised access constraints add to household financial pressures.
Commerce and Consumer Affairs Minister Scott Simpson (pictured) said in a statement on Feb. 2 that easing cost-of-living pressures remains a central objective for the administration and that insurance is among the areas under review. “With respect to insurance, we will consider necessary initiatives in this area,” Simpson said, as reported by Interest.co.nz.
Treasury has been assessing affordability trends in a paper titled Insurance affordability future work options, released in redacted form under the Official Information Act. The analysis notes that residential insurance premiums have risen at roughly three times the rate of consumers price index (CPI) inflation since 2011 and have climbed by more than 40% in the past two years. The paper also cites a recent S&P Global assessment that forecasts gross written premium in New Zealand’s property/casualty sector will continue to expand at around 9% a year through 2027. Gross written premium represents the total amount paid by customers for coverage on policies issued by an insurer.
According to Treasury, several factors are contributing to premium growth:
It notes that insurance remains broadly available, but that access “is becoming more difficult in areas facing both high earthquake and flood risk.” Consumer NZ research from August indicates that more households are cancelling or reducing insurance as premiums increase, although Treasury says data gaps make it difficult to measure the impact on coverage levels. Underwriting decisions in specific regions show how capacity constraints are developing. AA Insurance has temporarily paused new home and landlord policies in the 7825 postcode, which includes Westport, citing elevated flood risk and the insurer’s existing exposure. AA Insurance head of underwriting Dee Naidu says the move reflects both the local hazard profile and the firm’s aggregate limits.
Naidu says the decision “reflects that AA Insurance’s exposure has reached a level where a pause on new policies is the most responsible step to ensure we can be there for our existing customers when they need us most.” Existing AA Insurance home and landlord policyholders in the area are not affected, with cover and renewals continuing subject to standard underwriting criteria. Naidu says the insurer has a transfer process so that a purchaser of a home the company already insures in the area “will be able to obtain cover with us, ensuring continuity of protection.” The pause is described as temporary and subject to review. Naidu says the company intends to reopen to new business in the area if its exposure falls below its internal maximum. AA Insurance has also placed temporary restrictions on new home cover in selected Canterbury postcodes with very high seismic risk, including Lincoln and Rolleston.
The Insurance Council of New Zealand (ICNZ) is calling for faster progress on climate adaptation and for closer examination of how risk reduction, solvency requirements, and affordability interact. Chief executive Kris Faafoi said the government’s National Adaptation Framework is “an important start, but there is urgency in turning intent into action to deliver enduring solutions that reduce risk and keep communities out of harm’s way. We strongly agree that adaptation must be embedded in long-term planning. Kiwis value the protection insurance provides from unexpected and unwanted events. But keeping insurance accessible requires of us, led by government, to step up and reduce the underlying risk.” Faafoi refers to investment in flood protection and limits on new development in high‑risk zones. “That includes investing in resilient infrastructure like flood protection and avoiding building in high-risk areas. Despite that, there’s concern that current efforts are falling short,” he said.
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Survey findings cited by ICNZ show that 65% of respondents accept that premiums may need to increase to reflect climate risks, and 61% believe government should lead efforts to protect communities from climate change. Forty‑four per cent (44%) say New Zealand is not investing enough in protection from natural hazards, while 35% disagree. Views on land-use controls are divided, with 43% describing them as strong and 39% disagreeing. “These results underline the need for greater certainty around the rules and tools to help communities reduce their exposure to natural hazard risks. Every dollar invested in adaptation brings significant long-term economic and social benefits. Acting now means we can avoid the far higher costs of future disasters and supports the long-term accessibility of insurance,” Faafoi said.
Treasury’s paper notes that insurers “consistently emphasise that reducing underlying natural hazard risk (including climate-related risk) is the best way to support affordable insurance pricing and availability,” while cautioning that any benefits for existing housing stock are likely to emerge over time. On solvency policy, ICNZ highlights New Zealand’s relatively stringent catastrophe capital requirements under the Insurance (Prudential Supervision) Act (IPSA), overseen by the Reserve Bank of New Zealand (RBNZ). Most insurers globally are required to withstand a 1‑in‑200 or 1‑in‑250 year catastrophe event, whereas New Zealand insurers must hold capital or reinsurance for a 1‑in‑1,000 year event. ICNZ says this approach constrains how freely local insurers can deploy capital compared with offshore peers, which “prevents domestic insurers from investing as much capital in the market, which can yield higher returns on investment and lower the cost of premiums charged.”
Treasury notes that the link between solvency settings and pricing is uncertain. It points to New Zealand’s risk profile as a factor supporting higher capital buffers and observes that some insurers already hold capital above regulatory minimums, suggesting that lower requirements would not automatically result in lower premiums. The RBNZ plans to release an exposure draft of proposed IPSA amendments for consultation in the first quarter of 2026.
Simpson’s reference to possible insurance initiatives comes alongside survey evidence that premiums are a growing focus within household budgets. A Westpac New Zealand survey of 1,087 customers found 28% expect their holiday spending to “definitely” or “probably” create financial stress in 2026, and another 23% say it might do so. Twenty‑three percent anticipate extra costs in January and February will add pressure, with annual bills such as insurance and tax among the key early‑year expenses, alongside repayments for summer holidays and education costs. Nineteen percent of respondents expect to rely on some form of debt – including credit cards, overdrafts, revolving credit, or loans from family and friends – to meet major early‑year outlays.
Cost‑of‑living concerns remain elevated: 73% of Westpac respondents report being extremely or moderately concerned, at a similar level to 2024. Expectations for stress in early 2026 are stable year on year, with 23% expecting more stress, 72% anticipating about the same, and 5% expecting less. Ipsos New Zealand research shows about one in four adults finds it difficult to make ends meet, with the largest increase reported among lower‑income households. Nearly half of respondents say they are concerned about job security, and a majority expects unemployment to rise over the coming year. Among those worried about job loss, more than four in five say they have reduced spending. Within this context, Consumer NZ data cited by industry stakeholders indicate that insurance has become a higher‑ranked financial concern for New Zealanders. It now sits fourth, after housing, groceries, and debt, up from sixth in October 2024. Respondents point to increases across house, contents, vehicle, and health insurance as contributors to pressure, and more people report distrust than trust in insurers.
For insurers, reinsurers, and intermediaries, the combination of regulatory reviews, climate adaptation policy, and household budget strain is affecting the environment in which they operate. In the Westpac survey, 35% of respondents identify annual bills such as insurance and tax as one of their largest additional costs in January and February. Respondents report using a mix of approaches to meet early‑year obligations: 65% rely on regular income, 34% draw on funds set aside for specific bills, 26% use general savings, and 19% turn to debt.
These funding patterns, together with evidence of cover being reduced or cancelled, raise questions about policy retention, sums insured and the level of protection households maintain. Against this background, Simpson’s reference to “necessary initiatives” on insurance affordability and accessibility, Treasury’s work on premium trends, and the RBNZ’s IPSA review indicate that pricing, capital management, product design, and distribution strategies are likely to face increased policy and market attention across the New Zealand insurance sector.
