The Reserve Bank is pushing for banks to track home insurance coverage across the full life of a mortgage, not just at settlement. The concern: affordability pressures and climate-driven insurance retreat could create hidden pockets of risk in bank loan books. [The Bank released its latest Financial Stability Report this week.](https://www.interest.co.nz/insurance/138373/reserve-bank-says-it-wants-banks-have-much-broader-sense-insurance-coverage-across)
The Reserve Bank is asking banks to take a longer-term view of whether the properties they lend against remain adequately insured — and wants lenders and insurers to share data to make that possible.
Acting Assistant Governor of Financial Stability Angus McGregor said banks are rigorous about insurance at the point a loan is established, but the Bank is focused on what happens over the full term of a mortgage. "We are working closely with insurers and increasingly with banks to really encourage banks, in particular, to be more focused on insurance coverage over the duration of the term of a loan rather than just at the beginning," he told reporters on Wednesday.
The call comes as the RBNZ's latest Financial Stability Report identified insurance as a growing area of concern. Residential property serves as a core component of bank collateral in New Zealand, and the country carries high exposure to natural hazards. That combination makes insurance coverage critical to the stability of the financial system.
The numbers behind the concern
The RBNZ estimates the total sum insured of New Zealand residential dwellings in 2024/2025 was around $1.5 trillion. The Natural Hazards Commission Toka Tū Ake estimates roughly 60,000 New Zealand homes are not covered by its scheme — a gap that can expose both homeowners and their lenders to uncompensated losses in the event of a disaster.
The report notes that while insurance coverage of residential property in New Zealand currently remains high, "emerging pressures from insurance affordability, underinsurance and insurance retreat from areas exposed to elevated flooding risk indicate financial stability risks may increase." It describes the overall situation as manageable in the short term, but flags that aggregate data can obscure pockets of vulnerability.
What the RBNZ wants to see
The Bank is encouraging data sharing at a system level between lenders and insurers, so banks can proactively identify where coverage on their loan books is weakening — rather than discovering problems only when a natural disaster reveals an underinsured or uninsured property.
McGregor said some banks and insurers are already working together on this, but the RBNZ wants to see it become standard across the industry. The Bank is also involved in a broader insurance affordability review, launched by the Government in February and running for six months, which is intended to produce better data on where affordability and availability pressures are most acute.
"Concerns over affordability, climate change, and dependence on global reinsurance mean the situation could change quickly and warrants monitoring," the report said.
Why it matters for borrowers
For individual borrowers, the issue is less about being told what to do and more about understanding the risks that underinsurance creates. If a bank holds a mortgage on an uninsured or underinsured property and that property is damaged or destroyed, the Homeowners Mortgage Protection cover may not be sufficient to clear the loan — leaving the borrower in a difficult position even if they have insurance of their own.
The RBNZ's push for better data sharing is structural in nature: it wants regulators and lenders to have a clearer picture of where risk is accumulating across the system, rather than waiting for a disaster to expose it.
This article is for general information only and is not personalised financial advice. Seek advice from a licensed financial adviser (registered on the FSPR) for guidance specific to your situation.