NHC to strengthen financial resilience of Natural Hazards Fund
The Natural Hazards Commission Toka Tū Ake (NHC) has released its first Statement of Investment Policy and Objectives (SIPO) which outlines its approach to long term investing.
Every insured homeowner across New Zealand pays an annual levy for the natural hazards scheme as part of their home insurance premium. The money goes into the Natural Hazard Fund (the Fund), which is managed by NHC and used to settle insurance claims for natural hazards damage. The current balance of the Fund is around $670 million.
“The SIPO sets out how the Fund will be managed and invested to ensure NHC can meet future claims for damage from natural hazards,” says NHC Chief Financial Officer Chris Chainey.
The Fund was depleted by the Canterbury and Kaikōura earthquakes. NHC has therefore taken a deliberately conservative approach to rebuilding and managing it in recent years, primarily through cash and short-term bank deposits.
“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,” explains Chris.
The SIPO is linked to the Government’s Funding and Risk Management Statement for the scheme. Key features include the following.
Clear investment objectives
NHC’s primary long-term objective for the Fund is to achieve returns exceeding inflation by 2.5 percent per annum over rolling five-year periods, supporting steady growth while maintaining discipline and accountability.
A staged and prudent investment approach
Investments will be made progressively across a range of asset classes, with clear limits to manage risk as the Fund moves further into investment markets.
Strong governance and oversight
Management of the Fund is supported by expert advice, an Executive Investment Committee and overseen by the NHC Board.
Responsible investment practices: Environmental, social and governance considerations are embedded in the investment approach, reflecting NHC’s responsibilities as a Crown entity and the requirement to protect New Zealand’s international reputation.
NHC has drawn on lessons from other New Zealand Crown entities with large investment portfolios, adapting best practice to the unique role of the NHC scheme.
“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,” Chris says.
Read the SIPO:
Statement of Investment Policy and Objectives(external link)