Natural Disaster Fund

The Natural Disaster Fund exists to make sure that EQC Toka Tū Ake can cover claims for damage in the event of a natural hazard event. Each year New Zealand homeowners pay an EQC levy as a part of their private insurance premium, which goes into the Natural Disaster Fund. We are responsible for managing the fund, which includes investing it. Over time, the levies and returns from our investments help to grow the Natural Disaster Fund.

If a natural hazard event happens, the fund gives everyone in New Zealand with a home insurance policy that includes fire (and most do) a baseline level of cover. We provide the first layer of insurance for residential homes, which is generally up to $300,000 plus GST and provide limited cover for certain areas of residential land.

Money from the fund is also used to:

purchase reinsurance from international financial markets
meet the costs of administering the EQC scheme
fund research and education that improves understanding of natural hazard risk and how to reduce it.

How the EQC levy is calculated

The levy payment is calculated to reflect the expected long terms costs of the natural hazards we cover , and the cost of administering the fund, including the cost of reinsurance. The Government will sometimes increase the EQC levy to keep pace with rising house prices and building costs. This makes sure that homeowners in New Zealand continue to have access to our natural hazard insurance cover if they need it.

Rebuilding the Fund after the Canterbury earthquake sequence

The fund was first created in 1945, when EQC was established (then called the Earthquake and War Damage Commission). By 2010 the natural disaster fund had accumulated to over $6 billion. Following the Canterbury and Kaikoura earthquake sequence, the entire fund was used up to settle claims for earthquake damage. We are now working to rebuild the fund, through levies and investments.

How the Natural Disaster Fund is invested

The money in the Natural Disaster Fund is invested in accordance with relevant provisions of the EQC Act, Ministerial Directions made under the Act, and the Crown Entities Act 2004.

Over its history, the fund has been invested in a mixture of New Zealand government stock and global equities.

Consistent with the approach of other Crown Financial Institutions, EQC Toka Tū Ake also complies with the United Nations Principles for Responsible Investment.

Read our statement of investment policies, standards and procedures. [PDF, 351 KB]

Reinsurance

One way we manage financial risk is by purchasing reinsurance. Reinsurance is insurance for insurers. We pay our reinsurers a premium every year for reinsurance cover, and if a big natural disaster happens, they step in to help cover the cost of settling claims.

We have been purchasing reinsurance since 1988, and each year we negotiate to buy reinsurance on the international market. In 2023, we paid around $286 million in reinsurance premiums to secure nearly $8.2 billion in reinsurance cover for New Zealand. This included the successful placement of the first ever catastrophe bond in which EQC Toka Tū Ake was able secure $225 million of reinsurance cover directly from international capital market investors.

Like many other forms of insurance, we will have to pay an excess if we make a claim with our reinsurance company. The current excess on reinsurance cover is $2 billion. We must be prepared to meet the costs of all claims up to $2 billion before we can call on our reinsurance cover. This excess is charged for each natural hazard event that happens.

Since we started purchasing reinsurance in 1988 we have paid over $3 billion in reinsurance premiums, and received more than $5 billion from reinsurers to cover claim costs from the Canterbury earthquake sequence.

Crown Guarantee

A fundamental feature of the scheme is that the New Zealand Government guarantees that if there is a major natural disaster and we can’t fulfil our obligations through the Natural Disaster Fund and reinsurance, the government will step up to meet the shortfall.

We pay the Crown an annual premium of $10 million for the Crown Guarantee.

Between 2018 and 2020 the Government provided $370 million to EQC Toka Tū Ake under the Crown Guarantee. The last $130 million of that total was on a repayable basis, which we have since repaid.