However, Treasury last month wrote to insurers to say ministers were still considering what to do and no changes would be made until at least mid-2027.

Finance Minister Nicola Willis explained she didn’t want to make a hurried decision, as she was mindful private insurance premiums had risen dramatically in recent years.

“It’s a major cost of living pressure,” she said.

Asked whether she was simply kicking the can down the road, Willis said she didn’t want to play a part in making insurance unaffordable, possibly to the extent some home owners ditched their cover.

“That’s not good for the resilience of the economy,” she said.

The way the Natural Hazards Commission works is all home owners with private insurance pay levies into a fund, which is used to settle claims for residential buildings and land damaged in natural disasters.

Because the commission’s cover is capped, costs home owners face above its limits can be covered by their private insurers.

If the cost of all claims related to a certain event exceeds $2.2 billion, the commission can tap into the $10.3b of reinsurance cover (including a catastrophe bond) it has.

The problem is, it only has about $600 million in its kitty. So, in the event of a major disaster, it would need the Crown to step in with up to $1.6b before it could use its reinsurance.

The last time the commission relied on its reinsurers was after the 2010/11 Canterbury Earthquakes, when it used $5b of reinsurance cover.

It has struggled to replenish its coffers ever since. Indeed, reinsurance costs have soared, as has the cost of building.

So, if there was a massive disaster tomorrow, the Government would need to issue more debt to get the funds to help the commission settle its claims.

The cost of this would effectively fall on all New Zealanders today and into the future, rather than existing home owners.

Nonetheless, Willis assured she believed in the Natural Hazards Commission model.

She pointed the finger at the previous government for not doing its bit to ensure the scheme was “fully funded”.

Until recently, Willis had joint responsibility for the commission with Associate Finance Minister David Seymour.

However, Seymour passed the delegation on to Willis, saying that having two decision-makers was overly complicated and slowed the decision-making process.

In June, he told the Herald that levies “almost certainly” needed to rise, but didn’t say whether he wanted that to occur soon, or at some stage beyond mid-2027.

Private home insurance premium inflation has abated now that insurers have recouped losses from Cyclone Gabrielle and the 2023 upper North Island floods, and the global reinsurance market has softened.

However, both private insurers and the Natural Hazards Commission still face much higher reinsurance costs than they did before the Canterbury earthquakes, because the risk is deemed to be higher and more reinsurance is being purchased.

Pre-quakes, the cost of all the reinsurance bought for New Zealand was equivalent to 0.2% of gross domestic product (GDP). It’s now the equivalent of nearly 0.9%, according to the Reserve Bank.

Jenée Tibshraeny is the Herald‘s Wellington business editor, based in the Parliamentary Press Gallery. She specialises in government and Reserve Bank policymaking, economics and banking.