A solution for Puna insurance crisis? Some residents pursue member-owned insurance cooperative

After most of the recently proposed legislative solutions have failed, Puna residents are hoping they can solve their district's impending housing insurance crisis.

When the last major home insurer announced last year that it would be leaving the Hawaii market by August of this year, homeowners in Lava Zones 1 and 2 discovered that their only other option for coverage, through the state-operated Hawaii Property Insurance Association, would cost several times their current rates.

In some cases, residents have said their annual home insurance costs would increase by 400% or more and would drive the region out of the realm of affordability for many.

But although some state lawmakers attempted to forestall the crisis by introducing several bills this year that could have offered relief to homeowners - whether through subsidizing home insurance, capping insurance premiums or other solutions - most of those efforts have stalled. Puna Rep. Greggor Ilagan introduced 10 such measures this session, and all of them died.

But one bill survives that could address the problem. Senate Bill 3234 would use land conveyance taxes to create a fund to subsidize insurers statewide and, hopefully, either keep them from leaving the market or entice them to return.

Puna Sen. Joy San Buenaventura, who co-introduced the measure, said insurance is becoming more expensive statewide, which she attributed to the unusual amount of federally declared disasters in Hawaii over the last few years - which she, in turn, attributed to climate change.

Because of Hawaii becoming an increasingly risky place to insure, insurance providers' reinsurance rates - which one insurance company buys from another to insulate itself from high claims - have gone up. Consequently, providers in Hawaii have had to raise their own rates or leave the market.

However, the bill does not specifically provide relief for Lava Zones 1 and 2, and includes provisions for the formation of another fund using money generated by transient accommodation taxes that would be used expressly for properties located outside of those lava zones.

At the same time, San Buenaventura said SB 3234 may not survive either. The omnibus bill has become complex and unwieldy over several revisions, and has been referred to a conference committee hearing that has not yet been scheduled.

With a legislative solution seeming less and less likely, residents are trying to take matters into their own hands to head off disaster.

"This will ruin our communities," said Andrea Rosanoff, chair of the Puna Citizens for Affordable and Sustainable Property Insurance. "We're talking about people going homeless, people having to sell their homes because they can't afford the coverage. And who's going to buy those homes?

"I'm worried Puna is not going to be affordable for people to live in anymore."

Rosanoff's solution, which she is pursuing with a handful of other homeowners, is the possibility of a member-owned insurance cooperative - called the Mutual Members Insurance Cooperative - that homeowners could buy into in order to afford the HPIA rates. While the project is only barely beyond the conceptual phase, Rosanoff said she hopes it can get off the ground before August, when many homeowners' insurance policies expire.

"We thought about doing a class-action lawsuit," Rosanoff said. "But we couldn't find a good lawyer who could take the time. And it would take too long, anyway. By the time we'd get to court, the crisis would have come and gone already."

Currently, the insurance cooperative exists only as a webpage bearing a simple questionnaire intended to gauge interest in the project. Rosanoff said that if "500 to 1,000" homeowners signal their interest in the project, members can start developing a business plan for the project.

Rosanoff added that there are about 3,000 homes in the affected lava zones that could be a part of the cooperative.

But even without legislation to bring relief to Puna residents, Rosanoff added that the government could be helping more than it is.

"HPIA needs to be audited," Rosanoff said, adding that the association reportedly raised premiums in Lava Zones 1 and 2 in 2018 to cover a $5 million loss, despite having more than $40 million in holdings. "It feels like there's something rotten in the state of Denmark over there."

Lava Zone 1 and 2 homeowners can fill out Rosanoff's questionnaire at mutualmembersinsurance.org.

Email Michael Brestovansky at [email protected].