$5.9 billion ACC deficit: Levies to rise

The Accident Compensation Corporation has made a paper loss of $5.9 billion after plummeting interest rates pushed up the valuation for its future injury claims.

The Government agency, which released its annual report yesterday, saw its outstanding claims liability surge to $61b which, with changes in inflation rates, contributed $5.7b to the accounting deficit for the year to June 30. That was despite a better than expected investment portfolio return, up 7.59 per cent at $46.7b.

ACC chair Dame Paula Rebstock said the deficit was not a cash loss as it was based on an actuarial revaluation of the future cost of claims.

“New Zealanders can be assured the net deficit will not impact our ability to cover injury treatment, rehabilitation and compensation costs.”

Rebstock said over the year ACC recorded a $414 million cash operating surplus which showed ACC’s funding structure was robust and able to withstand short-term volatility, including falling interest rates.

However, she warned that in the medium term levies would need to increase to reflect the rising cost of medical procedures, weekly compensation claim growth, legislative and pay rate impacts, under-funding in the accounts and the impact of successive deficits from the fall in interest rates.

Levies are assessed every two years and any rate changes were smoothed over 10 years.

Rebstock said it would need to wait until next year to understand all the factors and what had changed.

The levies are set by the Government while the ACC board just makes recommendations. It is due to make its next recommendation in 2021.