Measures seek to ease Puna’s insurance crisis

PUNA, Hawai‘i — A raft of bills in the state Legislature aim to stave off an insurance crisis in lower Puna.

Ten bills, spearheaded by Puna Rep. Greggor Ilagan, propose a wide variety of solutions to a problem that reared its head last year when Universal Property and Casualty Insurance Co. of Florida announced that it would withdraw from the state insurance market by the end of August of this year, leaving its roughly 1,000 policyholders in the state — most of whom are on the Big Island — in a difficult position.

With Universal, one of the last providers offering coverage in lower Puna, abandoning ship, most homeowners will be left with only one insurance option: the state-run provider of last resort, Hawaii Property Insurance Association, whose yearly rates for basic coverage have ballooned to thousands of dollars.

In an effort to forestall this crisis, Ilagan’s bills — House Bills 2047 through 2056 — offer solutions ranging between minor changes to the management of HPIA to sweeping laws governing how insurance providers can operate in Hawaii.

“We had a lot of ideas, but we’ve landed on these 10,” Ilagan said. “I know the insurers might not like some of them, but this is hitting my constituents hard.”

Arguably the most substantial of the bills is HB 2047, which would establish a state-run “lava zone insurance fund” that would help subsidize insurance premiums for certain residents in Lava Zones 1 and 2. While the current version of the bill does not specify how much money would be allocated to this fund, beneficiaries would be limited to low-income households.

Ilagan said the fund, if established, would award to eligible households insurance vouchers of an indeterminate value: “It could be $200 or it could be more like $1,000.”

Other bills would directly address insurance providers and how they operate. HB 2053 would establish a cap on premiums for properties located in Lava Zones 1 and 2 using comparable Big Island properties outside of those zones, while HB 2052 would simply prohibit insurers from refusing to issue coverage to an applicant just because that applicant lives in a lava zone.

Another bill, HB 2055, would establish a two-year moratorium on all mortgage foreclosures within Lava Zones 1 and 2.

“The state can set rules for how providers can do business in Hawaii,” Ilagan said, although he noted that, unless handled deftly, measures like this could simply scare providers out of the state entirely.

Five of the remaining bills — HB 2048, 2049, 2050, 2051 and 2054 — would make changes to HPIA, such as adding another public representative to the association’s board, requiring the association to post annual updates about its activities, funding upgrades to its computer systems, expanding its coverage to commercial properties, and requiring it to offer policy packages that don’t include volcano-related coverage.

Ilagan said that last one won’t help out mortgagees at risk of losing coverage, but could help others find more affordable coverage outside of Lava Zones 1 and 2.

The last bill, HB 2056, would establish a “State Reinsurance Exploratory Working Group” to investigate the possibility of a state-run reinsurance program that would help insulate providers from liabilities associated with operating in high-risk areas.

Whether any of these bills will alleviate the crisis remains to be seen — none have yet been discussed at House committees, although two have hearings scheduled for Wednesday.

“I think they’re a good start,” said Andrea Rosanoff, chair of the Puna Citizens for Affordable and Sustainable Property Insurance.

Rosanoff said she and other Puna residents helped craft the bills, noting that while the problem rose to the level of a crisis last year, it has been brewing for years.

HPIA’s reinsurance expenses first increased by 144 percent around 2014 — corresponding with a nondamaging lava flow that broke out near Pahoa — and again by 111 percent following the 2018 Kilauea eruption, according to data collected by Rosanoff.

With rising reinsurance costs, Rosanoff said HPIA made up its own operating losses by increasing its rates, leading to the current problem.

Rosanoff noted that the number of insurance claims to HPIA regarding the Lahaina wildfires will doubtless dwarf those made in Puna, which she said is an opportunity for the state to reform how it handles insurance entirely.

“What it’s opened up is this question about the whole future of Hawaii, even the world: How are we going to insure homes in this era of climate change?” Rosanoff said.

Rosanoff pushed back against critics who argue that Puna residents know the risks inherent to the district and therefore “deserve” higher insurance rates.

“The county and state have been approving permits here for decades,” Rosanoff said. “Puna’s also one of the last places on the island you can get affordable housing. … We’re not just foolish people who were stupid to buy in a lava zone. Insurance has to be nondiscriminatory.”