Insurance Recovery Levy Questions & Answers 

Why has Napier Port had to implement this levy?

New Zealand has been hit by two significant earthquakes in less than a decade. Two New Zealand ports have been severely damaged and global insurance companies now consider the New Zealand port sector as high-risk, with total pay-outs expected to be in excess of $800M.

Due to this perceived increased risk, Napier Port has been faced with significant increases to its insurance premiums, particularly its material damage and business interruption cover.

The impact of this is that the cost of our cover has gone up more than 100% on a year ago and the level of excess or deductible on each claim has also doubled from $12.5 million to $25 million.

The increases alone in total costs of port insurance cover is $2.16 million.

Who is charged the levy and how much is it?

Napier Port looked at a number of options, including absorbing the costs or a portion of the costs, however this is simply not possible given the quantum of the increase.

Like other businesses facing insurance increases, we have no choice but to pass those costs onto customers in order to keep Napier Port financially sustainable. Napier Port is now charging all port users an insurance recovery levy:

*Napier Port meet with industry representatives and Napier Port adjusted the levy after feedback that all port users be included.

When was it implemented?

We gave customers as much notice of price increases as possible. Napier Port started paying the increased insurance amount on July 1, 2017 - absorbing three months of the increased premium. Napier Port was given less than 7 days’ notice of the increase.

From October 1, 2017, Napier Port began charging all port users an insurance recovery levy.

How long will the levy be in place?

After 6 months of implementation, we will review the cargo volume and its impact on the insurance levy. In October 2018, we will also be re-negotiating our insurance contracts and any benefits derived from those negotiations will be incorporated into that review.

After consultation with the transport industry, Napier Port decided to charge the levy to container customers via VBS for a fixed period of 18 months only.

After that time, Napier Port will look to charge the levy via shipping lines as the majority of our pricing agreements with the container lines will have expired and we are forecasting that the global shipping market will make it more tenable for us to do that at the time without the current risks we’ve identified.