Hawaii Insurance Commissioner to State Senate: Don’t Raid Hurricane Relief Fund

Copyright 2010 A.M. Best Company, Inc.All Rights Reserved BestWire

February 25, 2010 Thursday 12:36 PM EST

479 words

Hawaii Insurance Commissioner to State Senate: Don't Raid Hurricane Relief Fund

Meg Green

HONOLULU, Hawaii

Hawaii Insurance Commissioner J.P. Schmidt is opposing a couple of state Senate proposals that would raid the state's hurricane relief fund to close a school budget shortfall.

The hurricane relief fund, which is currently worth about $187 million, was established after Hurricane Iniki, which struck the islands on Sept. 11, 1992. After the hurricane, which caused $2 billion in damage, most private insurers fled the hurricane market, Schmidt said.

"There is no magic number for how much can be taken out of the hurricane relief fund, but the more you take out, the less able and less quickly we are able to address the problems after the next hurricane hits," Schmidt told BestWire.

Hurricane insurance is typically offered as a separate policy from a standard homeowners policy, although some standard homeowners policies include wind coverage.

The hurricane fund was established as a state-based emergency fund that could be activated to provide hurricane insurance if the private market closed down again after a major hurricane. It was funded through fees, but payments were discontinued in 2001, and the state even decided to funnel any interest the fund earns into the state's general fund, so it is no longer growing.

Like many states, Hawaii is struggling this year to close a gap between revenue and expenses. The schools, which are funded through the state, have proposed furloughing teachers -- and cutting the number of school days -- to close the budget gap.

Two bills are proposing to close the gap by taking money from the hurricane relief fund. Senate Bill 2124 would take $36 million from the hurricane fund to restore six instructional school days through June, while Senate Bill 2436 would take $75 million from the fund to restore 24 days through the next school year.

Schmidt has testified against both bills.

The good news is the fund is dormant right now, because the state's private market for hurricane insurance is quite active, he said. Six new companies moved into the market last year.

But because the fund is dormant, it "makes it more of a target," Schmidt said. He said the concept of the hurricane fund is good. "It provides some assurance to the market that there is a backstop, there is a plan for reasonably dealing with the after-effects of a hurricane. It avoids some of the problems we've seen in other states with the hurricane insurers of last resort or a reinsurance-type fund."

The largest writer of hurricane insurance in Hawaii is the Zephyr Insurance Co. Inc., Schmidt said.

According to BestLink, the top five writers of homeowners multiperil insurance in Hawaii, based on direct premiums written in 2008 were State Farm Insurance with 27.29% market share; Kingsway America at 22.15%; USAA Group at 9.39%; CNA Insurance Cos. 9.11% and Allstate Insurance Group 6.48%.

(By Meg Green, senior associate editor, BestWeek: [email protected])

February 26, 2010 <br>

Copyright © 2010 LexisNexis, a division of Reed Elsevier Inc. All Rights Reserved.
Terms and Conditions Privacy Policy