Lahilahi Heen has resided for many years in her three-bedroom house nestled within the well-kept landscape of the Hawaiian Shores area in Lower Puna, a location vulnerable to the active Kilauea volcano.
Her home, which is positioned just outside Pahoa Village, narrowly escaped the lava flow that threatened the region back in 2014. Nevertheless, the looming threat of lava remains a constant concern as she now finds herself grappling with a new peril.
The cost of her homeowner’s insurance skyrocketed from $1,500 in 2022 to an astonishing $5,000 in the following year. Unable to bear the financial burden, Heen opted to take matters into her own hands. She managed to gather $30,000 primarily through borrowed funds to pay off her mortgage, resulting in her decision to forego insurance.
“It was an incredibly stressful experience. I discovered new swear words,” she recounted, reflecting on that pivotal choice.
Heen represents a growing number of Big Island residents facing a critical shortage of affordable insurance in sprawling neighborhoods that were developed in some of the most hazardous lava zones.
These regions provide some of the most budget-friendly housing options in Hawaii, with the median house price in Pahoa hovering around $360,000. However, private insurance companies have nearly entirely retreated from Lava Zones 1 and 2, deeming them too risky for coverage.
Consequently, for numerous homeowners in these areas, the only available coverage comes from the Hawaii Property Insurance Association (HPIA), an entity created by the state in 1991 to insure homes situated in lava zones. Yet, the cost of HPIA coverage has surged to such an extent that many residents are either canceling their policies or listing their homes for sale.
The ongoing insurance crisis in these lava zones may soon extend beyond to other homeowners in Hawaii as climate change continues to escalate across the state. Lawmakers have voiced concerns that other private insurers might follow suit and exit the market, prompting discussions about potential solutions.
Earlier this year, state lawmakers considered bills aimed at ensuring homeowners could access coverage via HPIA and the Hawaii Hurricane Relief Fund should the situation require it.
Experts, however, argue that little can be done to address the rising costs of coverage in high-risk areas such as lava zones where private insurers are absent.
During the 1950s and 1960s, local authorities permitted developers to subdivide vast areas in high-risk lava zones, selling these lots with little infrastructure. Over the years, many individuals have chosen to settle in these areas due to the affordability they offer amidst Hawaii’s high cost of living.
Puna, covering roughly 500 square miles—similar in size to Oahu—experienced a significant eruption in 2018 that destroyed over 600 homes in Leilani, which marked the beginning of a retreat by private insurance providers and an increased reliance on HPIA.
Andrea Rosanoff and her partner, Steven Sparks, have called Leilani Estates home since 2003, having built their residence amid the jungle on Kilauea’s East Rift Zone.
They are now paying $5,900 annually for the maximum coverage of $350,000, a significant load for a couple dependent on social security. Despite the financial strain, they are resolved to remain in their home.
Many neighbors, however, have faced tough dilemmas. Rosanoff remarked, “People, especially retirees like former schoolteachers and nurses, are simply opting to go without insurance.”
Some homeowners, she noted, are spending a year’s worth of payments at these inflated rates to buy time for selling their properties. “This is essentially destroying the community of homeowners in this affordable area,” Rosanoff commented.
Greggor Ilagan, the State House Vice Speaker representing the region, proposed several initiatives during the recent legislative session. However, two crucial bills aimed at capping insurance premiums and establishing a moratorium on foreclosures in lava zones did not receive any hearings.
An additional bill intended to create a funding pool to assist with insurance premiums also quietly failed to advance. Ilagan advocates for state intervention to support lower-income residents, particularly elderly individuals on fixed incomes, suggesting possible premium subsidies.
Nonetheless, there are dissenting voices. Alison Ueoka, president of the Hawaii Insurers Council, contended that insurance prices should accurately reflect the associated risks, and the lava zones certainly present a high-risk scenario.
In fact, HPIA is looking to further increase their rates, Ueoka mentioned, and the organization did not respond to requests for comment.
“If the state intervenes to subsidize residents in lava zones, it sets a precedent for others who might expect similar help,” she asserted. “Why should they be treated any differently than others in Hawaii? They already benefited from purchasing cheaper homes.”
She emphasized that although lava zone residents may be low-income, “there are disadvantaged individuals everywhere.” The nonprofit insurers council represents about 40% of the property and casualty insurers in Hawaii.
Beyond the immediate concerns of lava zones, Ilagan suggested that authorities also focus on the insurance issues affecting condominiums on Oahu and the increasing difficulties for coastal property owners in places like the North Shore in securing affordable coverage.
“We face an insurance issue across the state, requiring comprehensive solutions rather than just addressing it as a Big Island concern,” he remarked.
People residing in lava zones often do so for similar reasons as those choosing to live in Oahu condos lacking fire sprinklers: it’s a financially feasible option within Hawaii.
Rosanoff has been attempting to form a nonprofit entity to advocate for a resolution but progress has been slow. She believes that the circumstances in the Lava Zones present an opportunity for exploring innovative solutions.
She warns that the situation faced by residents in Lava Zones 1 and 2 could foretell challenges awaiting others in the state, as homeowners throughout Hawaii might soon face a similar squeeze on insurance costs.
“We must confront the reality of natural disasters and climate change; that is our future,” she stated. “Let’s be realistic.”
Rosanoff calls for the state to engage as a reinsurer, providing insurance companies like HPIA with the means to mitigate their risks and guard against catastrophic losses.
“Such measures could potentially offer substantial long-term relief,” she expressed.
Costs for reinsurance have also surged in recent times, largely due to losses from disasters worldwide.
Ilagan introduced a bill to form a working group examining the feasibility of a state-backed reinsurance program, but this initiative also faced challenges and ended without further progress in the state Senate after initially passing in the House.
Despite the ongoing discussions, the insurance complications plaguing the lava zones—and those relying on HPIA—remain unresolved.
Keohokalole emphasized that the state-funded safety net is fulfilling its purpose in Puna by acting as a last resort when commercial options vanish.
“The costs reflect the need to maintain the financial sustainability of the program,” he noted, pointing to escalating expenses as a result of needing to purchase reinsurance.
Global reinsurers have been incurring significant losses—up to $100 billion annually for the past five years—due to disasters both within the U.S. and across the globe, prompting them to re-evaluate risks and adjust their rates accordingly.
Regarding the possibility of subsidizing coverage in lava zones, Keohokalole remarked, “We need to consider whether taxpayers statewide are inclined to fund subsidies for residents living in high-risk areas.”
“This raises critical questions about the precedent it sets and the potential financial implications,” he added, highlighting the complexities of the current insurance landscape.
Ueoka expressed concerns that HPIA could place a burden on private insurers, as those companies might face assessments to support HPIA should it experience funding shortages.
HPIA operates akin to a Fair Access to Insurance Requirements Plan, designed to provide coverage to individuals and businesses without access to regular market options.
Should the program suffer significant losses beyond its financial resources, it may trigger financial assessments on private insurance companies to cover the shortfall. This potential for increased costs could lead insurers to either limit their operations in the market or withdraw altogether, Ueoka warned.
Nevertheless, the Hawaii Insurers Council has backed a proposal aimed at expanding HPIA to take on additional risk, such as for condominiums, due to their search for statewide solutions.
As discussions continue, attention remains focused on insulating the hurricane relief fund and HPIA to provide necessary coverage in the future.
“Everyone is eager to find solutions,” noted Heen, a 64-year-old bank teller whose insurance coverage was terminated when Universal Property & Casualty exited the Hawaii market.
Worried that her bank might compel her to secure more expensive insurance or even face consequences regarding her home, she initially paid for one year of HPIA coverage with a gift but later dropped the policy after paying off her mortgage.
Heen expressed interest in obtaining insurance for hurricane protection for her Hawaiian Shores home, but she first needs to accumulate some savings.
She has encountered individuals in distress, such as a woman on the verge of losing her home due to financial hardship and others frantically searching for more affordable housing after rent hikes attributed to increased insurance costs.
“Everyone is desperately trying to find lower rents or the prospect of lower rents,” Heen concluded.