Hawaii’s lawmakers commenced a new legislative session on Wednesday, emphasizing their commitment to stabilize the state’s property insurance sector. The escalating threats from hurricanes, wildfires, and other climate-induced disasters—both locally and across the globe—have led insurance providers to substantially increase their rates.
The property insurance landscape in Hawaii is directly influenced by catastrophic events in states like Florida, North Carolina, and California. This is because insurance companies rely on the global reinsurance market to safeguard themselves against potential losses. As reinsurance prices rise in the aftermath of disasters, many insurers are considering raising rates in Hawaii or withdrawing entirely from the market.
Even before the catastrophic wildfires that ravaged Maui in August 2023, Hawaii was increasingly viewed as a state at risk for disasters, a view that has only intensified following recent events. Senate President Ron Kouchi elaborated on this issue during a news conference, highlighting growing concerns about the viability of insurance in the state.
The recent wildfires near Los Angeles, which have resulted in the destruction of numerous structures, have exacerbated the difficulties in the insurance market. AccuWeather provided a preliminary estimate suggesting the damages and associated economic losses could reach between $135 billion and $150 billion, potentially marking this as the costliest wildfire event in U.S. history.
State Senator Jarrett Keohokalole, who leads the Senate Commerce and Consumer Protection Committee, elaborated on the complexities of the current situation, emphasizing its unpredictable nature. “We lack certainty regarding how the Los Angeles fires will impact the insurance market as they continue to burn,” he said. Keohokalole expressed concern that, while it remains unclear whether the market has hit rock bottom, the frequency and severity of large-scale disasters are predicted to increase, necessitating proactive measures.
In response to the current challenges, Senate Democrats are proposing to revive programs established after Hurricane Iniki devastated Kauai in 1992, which significantly disrupted the property insurance landscape. Following that hurricane, the state created a fund to provide residents with hurricane insurance.
The Hawaii Hurricane Relief Fund, initiated post-Iniki, successfully provided coverage to 155,000 policyholders for a decade before private insurers gradually re-entered the market. This fund was financed through a combination of policyholder premiums, assessments on licensed property and casualty insurers, a special mortgage recording fee, and a surcharge on premiums from licensed insurers. However, while the state had the authority to issue bonds to support the fund, these were never issued.
Keohokalole acknowledged the limitations of state resources, stating that he could not assure that renewing such programs would result in affordable pricing for homeowners. He emphasized the necessity for residents in Hawaii to have access to local insurance options, especially considering the unique risks posed by tsunamis, wildfires, and hurricanes.
Condominium owners in Hawaii are facing particularly severe impacts due to the instability of the insurance market. Last year, testimonies presented to the Legislature indicated that condominium boards were opting to lower their coverage amounts in response to rising premiums. This situation poses a challenge, as entities like Fannie Mae and Freddie Mac—key buyers of home loans—only consider mortgages for units fully insured for replacement value, leading to complications for banks financing these properties.
Keohokalole noted the pressing need for lawmakers to deliver effective solutions during the current session, which concludes in May. Kouchi echoed this sentiment, stressing that a lack of insurance could force individuals to pay cash for homes—an untenable situation in a state where the median price for a single-family home exceeds $1 million in many areas.
The ongoing challenges posed by the wildfires in Los Angeles are also spotlighting California’s strained insurance market, where insurers have begun to minimize their exposure by reducing property coverage amid a climate landscape that increasingly favors catastrophic events such as wildfires, floods, and severe windstorms.
