The Natural Hazards Commission Toka Tū Ake (NHC) has set out how it intends to invest the Natural Hazards Fund over the long term in order to meet future claims, releasing its first formal investment framework as discussion continues over scheme funding, climate risk, and insurance affordability.
Every insured homeowner in New Zealand pays an annual levy for the natural hazards scheme alongside their home insurance premium. Those levies are pooled in the Natural Hazards Fund, which NHC administers to pay claims for damage from events such as earthquakes, landslides, and other covered natural perils. The fund currently holds about $670 million. With the publication of its first Statement of Investment Policy and Objectives (SIPO), NHC has outlined the fund’s investment objectives, risk limits, and governance arrangements. “The SIPO sets out how the fund will be managed and invested to ensure NHC can meet future claims for damage from natural hazards,” NHC chief financial officer Chris Chainey said.
The fund was heavily drawn down following the Canterbury and Kaikōura earthquakes. In the years since, NHC has rebuilt its balance with an emphasis on low-risk assets, largely cash and short-term bank deposits. Under the SIPO, the commission plans to move progressively to a more diversified portfolio, using a phased approach into a broader range of asset classes within specified risk limits. “The new SIPO outlines the risks we’re prepared to take and the outcomes we are aiming for over the long term. We’ll use a staged approach to diversification that supports sustainable growth, while continuing to manage risk carefully,” Chainey said.
NHC’s primary long-term investment objective is to generate returns that exceed inflation by 2.5% per annum over rolling five-year periods, according to the SIPO. The commission says this is intended to support long-term management of the scheme’s finances. Governance arrangements include an Executive Investment Committee, external investment advice, and oversight by the NHC board. The SIPO is aligned with the government’s Funding and Risk Management Statement for the scheme and incorporates environmental, social, and governance considerations into investment decisions, consistent with NHC’s status as a Crown entity. NHC said it had considered practices used by other Crown entities with large investment portfolios and adapted them for the specific mandate of the Natural Hazards Fund. “NHC is confident the SIPO provides a strong, disciplined foundation for growing the Fund over time, building financial resilience, and ensuring New Zealand is better prepared to meet the cost of future natural hazards,” Chainey said.
The investment changes follow a government decision in November 2025 to keep the NHC levy at its existing level, a move welcomed by the Insurance Council of New Zealand | Te Kāhui Inihua o Aotearoa (ICNZ) in the context of cost-of-living pressures. The levy is collected by insurers on behalf of the government and contributes to the cost of basic natural disaster cover under the NHC scheme. “Keeping the levy unchanged for now is good news for households facing ongoing cost-of-living pressures. We welcome the government’s decision and the importance of keeping insurance accessible. Taxes and levies already account for around 40% of a home premium,” ICNZ chief executive Kris Faafoi said when the decision was announced.
ICNZ cited survey findings showing that 50% of respondents were unwilling to pay an additional $200 a year to ensure the NHC was properly funded, while 30% said they were prepared to pay more. Faafoi said the NHC “continues to play a vital role in supporting recovery when disasters strike” and noted the trade-off policymakers face between the scheme’s long-term funding settings and short-term affordability for households.
For insurers, the long-term sustainability of the fund and the availability of private insurance are closely connected to how exposure to natural hazards is managed. ICNZ has continued to argue that reducing risk at a community level is central to keeping cover available over time. “ICNZ has continually emphasised that the best way to manage long-term accessibility is to reduce risk across communities before disaster strikes,” Faafoi said.
Faafoi pointed to the government’s National Adaptation Framework as a key policy platform but said further detail is needed on how it will be implemented. “The government’s National Adaptation Framework provides much-needed direction on how government, councils, the private sector, and communities will work together to reduce and manage climate-related risks. However, we need clear rules, funding arrangements, and responsibilities locked in quickly so that adaptation can move from paper to real projects on the ground. By reducing risk, we protect our communities and ensure insurance remains accessible,” he said.
Survey results released in February 2026, commissioned by ICNZ, indicate broad public support for proactive risk reduction. According to the research, 87% of respondents support acting in advance to reduce risks from climate-related events such as flooding, landslips, and sea level rise. The survey also found concern about the outlook for natural perils, with 71% agreeing that natural disasters are likely to become more frequent and serious because of climate-related changes.
Faafoi cited modelling indicating that “major cyclones could bring up to 35% more rainfall to New Zealand by the end of the century,” increasing flood risk. The findings suggest there is some acceptance of higher costs in line with risk and an expectation of government leadership. ICNZ reported that 65% of respondents accept premiums may have to increase as climate risks grow, while 61% believe central government should lead efforts to protect communities from climate change.
Views on existing protections are mixed. Some 44% of respondents believe New Zealand is not investing enough to protect communities from natural hazards, compared with 35% who disagreed. Meanwhile, 43% said there are strong land-use controls, while 39% disagreed, indicating differing perceptions about development in higher-risk locations. Taken together, NHC’s new SIPO, the current levy settings, and the survey findings outline for insurance professionals three related areas of focus: the fund’s investment strategy, the impact of scheme and tax settings on premium levels, and ongoing work on adaptation and risk reduction across New Zealand.
