EDITORIAL: Insurance study is just first step

DTRIC Insurance Co., one of Hawaii's local carriers, last week announced its impending exit from the market, citing rising insurance costs. It represents a relatively small part of the market, but the worry is more that the departure could represent the proverbial canary in the coal mine, signaling worse disruptions to come.

Lawmakers were already aware of pressures confronting the insurance industry here, not the least of which was the 2023 wildfire that destroyed thousands of Maui homes, in a state already acquainted with hurricanes, lava flows and other high-risk natural hazards.

Those at the state Capitol who are most familiar with the economic landscape rightly believe that more must be done to strengthen insurance availability and affordability for the long term. This is why Act 296, the bill signed by Gov. Josh Green in July, includes a call for the state insurance commissioner to conduct a study to identify possible long-range solutions.

One legislator looking into further changes is state Rep. Scot Matayoshi, who chairs the House Committee on Consumer Affairs and Commerce and who sat on the conference committee readying the bill for passage.

Matayoshi said that for starters, he hopes to sit down with DTRIC executives to learn more about the company's decision to withdraw. DTRIC, established in Hawaii more than 30 years ago, issues some homeowners policies but focuses mostly on auto insurance.

There may be factors specific to the company that prompted its decision to leave, he said, but a discussion should inform lawmakers about more general market vulnerabilities.

The state also acknowledges the national trends at play: "rising reinsurance costs and Hawaii's increasing exposure to catastrophic risk," Jerry Bump, chief deputy insurance commissioner at the division, told the Honolulu Star-Advertiser.

Indeed, climate change has intensified storms and other natural disasters.

However, Matayoshi said, Hawaii's longstanding problem has been one of supply and demand: Too few companies are what the state calls "admitted carriers," meaning their premium rates are subject to regulation by the state.

So when an admitted carrier will not issue a policy based on risk, the homeowner, condo association or other applicant must go elsewhere to find coverage, Matayoshi said, largely ending up with "surplus line carriers" that can charge much more.

This has been an issue especially with condominiums, the impetus behind last session's measure.

"Due in part to the shrinking condominium insurance marketplace," the measure reads, "condominium building master property insurance policy premiums have increased exponentially," with deductibles hitting as high as $250,000.

This leaves the homeowners bearing huge losses after catastrophes, and insurance carriers fleeing to lower their risk exposure. Clearly, that's an unsustainable condition.

The new law reactivates the Hawaii Hurricane Relief Fund to provide hurricane coverage for condo associations that have been denied hurricane insurance. It also expands the Hawaii Property Insurance Association to increase the capacity of the insurance system.

Matayoshi is exploring a loan program for pipe replacements and sprinkler systems to lower risk and make insurance more available and affordable. He also thinks cutting bureaucratic delays for insurers to seek rate increases would encourage more companies to stay in the market.

Considering those ideas and surveying solutions other states are pursuing comprise a reasonable strategy for the Legislature, which took an important first step with Act 296 but has much more work to do.