How does the NSW Emergency Services Levy (ESL) affect your Strata Insurance Premium

How does the NSW Emergency Services Levy (ESL) affect your Strata Insurance Premium

As Insurers update their contributions for the NSW Emergency Services Levy (ESL), we feel it is a timely reminder to keep Strata Managers informed of the changes that will impact insurance premiums.

What is the ESL?

The ESL is a regular contribution towards emergency service agencies in NSW. The ESL is added to your strata insurance payments each year. Once collected, ESL contributions go toward funding emergency services in NSW, where it helps to keep our community safe during times of urgent need.

Insurers are required to contribute about three-quarters of the total fire and emergency services budget each financial year.

Does everyone pay ESL?

No, only people who take out property insurance in NSW pay the ESL. Property owners who do not insure their property, or who fund their property risks by other means do not pay the levy. However, all property owners receive the benefit of the emergency services when required.

NSW is the only mainland state to use an insurance-based funding model for fire and emergency services. Other states have transitioned to a property-based model where the levy is applied to property rates.

How is the ESL calculated?

ESL contributions have increased considerably in recent years, from $785m in the 2018-2019 financial year to $1,090 million in 2020-21. The budget and any increases, are set by the Chief Commission of State Revenue, and are principally used to fund workers compensation reforms, as well as increased expenditure on NSW fire and emergency services. Insurance companies are required to estimate their contributions against the set budget, and in order to meet the budget, Insurers may have to adjust their ESL rates for this financial year.

As an example of how one insurance company is implementing this Government imposed increase in respect of Strata New Business and Renewals policies, please refer firstly to their new NSW ESL rates:

Product Class
Residential Property
Commercial Property

Previous Rates

New Rates
Date to take effect
1 October 2020
1 October 2020
How does the ESL increase affect Strata Premium?

In the example below, we see a Residential Strata Insurance policy with a $10,000 Base Premium experiencing an $809.32 increase purely due to the increased ESL. This is without the application of any general increase to the insurer’s rates, which would be in addition to any premium increase stemming from change to the building’s risk exposure or a deterioration in the claims history.

As demonstrated in this example, it is important to remember that increases in the ESL rate has a ‘compounding’ effect, as it is then ‘added’ to both the GST and Stamp Duty components, ensuring the final premium is further exacerbated by this one rate rise.

Base Premium
GST @ 10%
Stamp Duty @ 9%

Previous ESL Rate
New ESL Rate
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