New Zealand is raising the Earthquake Commission (EQC) premium rate by a third to replenish disaster funds drained by Canterbury and Kaikoura catastrophe claims.

The EQC rate will rise from 15 cents to 20 cents per $NZ100 ($94) in cover from November 1, boosting the annual premium by up to $NZ69 ($65) a year. The money is collected as a separate levy paid by insurance policyholders with home or contents cover.

The increase will put New Zealand “well on the road” to restoring the National Disaster Fund to around $NZ1.75 billion ($1.64 billion) within 10 years, Finance Minister Steven Joyce said in his Budget speech last week.

The fund, with the support of international reinsurance, has so far paid out more than $NZ9.5 billion ($8.9 billion) for the Canterbury earthquakes, and claim payments for Kaikoura are expected to reach around $NZ550 million ($517 million).

“Those claims will completely exhaust the National Disaster Fund,” Mr Joyce said. “We need to restart the process of replenishing it.”

But the Insurance Council of New Zealand (ICNZ) says major increases in taxes and levies on people with insurance could see low-income households dropping their cover.

Home policyholders from July also face a 40% increase on the levy used to fund the fire services.

ICNZ CEO Tim Grafton said people with house and contents insurance will be levied and taxed more than $NZ450 ($423), without counting the 15% GST applied.

“If fewer people insure that will not only put upward pressure on the cost of insurance and so create a downward spiral, but it will also create a moral hazard for the Government,” he said.

“General taxation should fund the fire service, which benefits everyone, insured and un-insured alike. The Crown balance sheet is now strong and can bear the $NZ1.75 billion ($1.64 billion) exposure that the EQC levy seeks to fund.”

That monetary level is the amount that the EQC needs to pay as its “excess” on its current reinsurance program.

The EQC covers the first $NZ100,000 ($94,050) of home damage from a natural disaster, up to $NZ20,000 ($18,800) of contents damage and land damage. Private insurers then cover claim payments above the cap.