Hawaii lawmakers opened their legislative session with a commitment to stabilize the state’s property insurance market, which has been shaken by climate change-driven disasters like hurricanes and wildfires. Rising reinsurance costs and increasing risk assessments have led insurers to raise premiums or entirely exit the Hawaii market.
Global Disasters Impacting Local Markets
Hurricanes in Florida and North Carolina, as well as wildfires in California, are driving up global reinsurance rates. Insurers who depend on this backup coverage are passing those costs onto homeowners in Hawaii. Even before the devastating August 2023 wildfires on Maui, insurers were classifying Hawaii as a high-risk state, further inflating premiums.
AccuWeather estimates recent Los Angeles wildfires caused up to $150 billion in damages, underscoring the strain on the insurance industry. State Sen. Jarrett Keohokalole, chair of the Senate Commerce and Consumer Protection Committee, emphasized the complexity of the situation, noting, “We don’t have any certainty...what we can expect is that these larger and larger disasters will continue to increase in frequency.”
Looking to the Past for Solutions
Lawmakers are considering reviving the
Hawaii Hurricane Relief Fund, initially created after Hurricane Iniki devastated Kauai in 1992. This state-backed insurance program covered 155,000 policyholders for a decade, offering an essential safety net until private insurers returned.
However, Keohokalole cautioned that limited state resources may not guarantee the affordable rates homeowners hope for. He highlighted the need for a locally accessible insurance solution, particularly for vulnerable populations like kupuna (elders) and struggling families.
Challenges for Condo Owners
Hawaii’s condominium owners are facing particularly steep challenges. Skyrocketing premiums have forced many condo boards to reduce coverage, but this leaves buildings underinsured for hurricane risk. Federal mortgage backers like Fannie Mae and Freddie Mac require full replacement coverage, leading to a ripple effect: banks are hesitant to finance condos that lack adequate insurance.
An estimated 375 to 390 condominium buildings in Hawaii are currently underinsured, creating barriers to homeownership in a state where median single-family home prices exceed $1 million in most counties. Senate President Ron Kouchi warned this issue could drastically impede homeownership as cash purchases become the only viable option without adequate insurance.
Planning for Resiliency
Keohokalole stressed the importance of long-term strategies, including fire safety measures and disaster resilience initiatives for homeowners. “Delivering something” during this legislative session, which ends in May, is critical to addressing these urgent needs, he said.
Broader Implications
The crisis in Hawaii mirrors challenges in California, where insurers are retreating from the market amid increasingly severe wildfires, floods, and windstorms. The situation underscores the growing difficulty of maintaining affordable property insurance in disaster-prone areas.
As Hawaii lawmakers move forward, their efforts to balance insurance accessibility with rising global risks will be closely watched, offering potential lessons for other states grappling with similar challenges.