Council resolution seeks to spur action on high cost of home insurance in Lava Zones 1 and 2

Hawaii County Council members are once again urging the state to take action against a looming insurance crisis that could leave hundreds of Puna residents unable to afford coverage.

When Florida insurer Universal Property and Casualty Insurance Co. announced in July that it will leave the Hawaii home and condo insurance market at the end of August 2024, hundreds of the provider's Puna customers found themselves between a rock an a hard place.

Without UPC, the only other coverage available in Lava Zones 1 and 2 is through the state's Hawaii Property Insurance Association, an insurance provider of last resort expressly established to underwrite coverage in high-risk areas that providers would otherwise be unwilling to enter.

But HPIA's insurance premiums have ballooned since the 2018 Kilauea eruption, and many UPC customers have found that their rates would go up by 400% or more.

The County Council passed a resolution on Wednesday strongly urging immediate action by several state bodies - including the state Legislature, the Department of Commerce and Consumer Affairs, and HPIA - to find ways to mitigate the financial burden on Puna residents. But what impact the state can have on the issue remains to be seen.

Puna Councilman Matt Kaneali‘i-Kleinfelder pointed out that, even outside of Lava Zones 1 and 2, homeowners associations have reported their insurance rates have been increasing for several years. He suggested that, while the HPIA rates are extreme, they are a symptom of a greater problem on a national level.

Other council members noted that similar problems have affected disaster-prone areas around the nation. Hilo Councilwoman Jenn Kagiwada said that insurance providers in California are pulling out of regions to avoid wildfire risk, while providers in Florida have done the same to avoid hurricanes.

"It's becoming a norm more and more where people are making insurance payments for years, but when they need an insurance payout after a disaster, the provider pulls out instead," said Hilo Councilwoman Sue Lee Loy.

The resolution proposes some possible state-level solutions for the problem, such as implementing subsidies or other financial assistance programs for Lava Zone 1 and 2 residents, creating a risk-pooling mechanism for the area, or expanding HPIA coverage to include commercial businesses.

Puna Councilwoman Ashley Kierkiewicz, who introduced the resolution, also suggested that the U.S. Geological Survey's lava hazard maps for the island could be re-evaluated.

"They are from the 70s," Kierkiewicz said, suggesting the USGS could take a closer look at the island's volcano hazards. "But taking a closer look at the volcano risks on the island could be a sort of Pandora's Box."

Council Chair Heather Kimball agreed, speculating that, while some areas on the island thought to be hazardous might turn out to be safer than expected, other areas thought to be safe might also turn out not to be.

Dozens of Puna residents submitted testimony urging action. Resident Patti Pinto wrote that HPIA has a "chokehold on homeowners in Lava Zones 1 and 2" and expected that there will be a wave of foreclosures on Puna mortgages in about four months unless somebody intervenes.

"This will be an economic disaster for Puna from which it will be very difficult to recover," Pinto wrote.

Resident Daysha Mendes said her insurance premiums are expected to spike from $1,500 to $5,000 once UPC leaves, which will impact the area "beyond comprehension."

Pahoa resident Edward Ford suggested that the county or state start a "lava emergency fund" fed by grants, local property taxes and other sources that could be used to "lure" insurance companies back to the area. In the event of a disaster, the fund could be used to help providers pay out claims, he wrote.

Meanwhile, Kierkiewicz addressed a common counterpoint that has been brought up throughout discussions of the issue: why not just move to a less-risky area?

"People want to be able to live their lives in the homes that they love," Kierkiewicz said, adding that, in addition to Puna's natural beauty and strong ancestral ties for many Hawaiians, the district has become one of the only places left in the state where home ownership is in any way affordable, and that, for many residents, moving out of the district would likely require moving out of Hawaii entirely.

The resolution passed unanimously.

Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.