Use of Hurricane Relief Fund grows significantly

State lawmakers on Monday received an update on Hawaii's efforts to stabilize its strained property insurance market, with officials pointing to early gains from the Hawaii Hurricane Relief Fund and warning of upcoming changes that could expand flood insurance requirements on Oahu.

The joint informational briefing held by the House and Senate committees dealing with commerce and consumer protection included presentations from the Department of Commerce and Consumer Affairs Insurance Division, the Hawaii Property Insurance Association and the Hawaii Hurricane Relief Fund.

The briefing also covered implementation of Act 296, which aims to stabilize the property insurance market and ensure coverage remains available when private insurers pull back.

Teri Fabry, speaking on behalf of the Hawaii Property Insurance Association and Marsh USA, said the Hawaii Hurricane Relief Fund has seen significant growth since its reactivation last year.

From its launch in late June through April 3, the fund received 311 submissions for hurricane coverage from condominium associations. Sixteen were rejected in the program's first few months as agents became familiar with eligibility requirements or submitted incomplete applications.

Of the total applications received, 293 resulted in quotes, 45 of which are pending, meaning the condo associations have received pricing but haven't decided whether to move forward. Officials expect to know within the next month how many will convert to active policies.

The pending quotes represent more than $5 million in premiums and approximately $3 billion in insured value.

So far, the HHRF has issued 97 policies totaling about $2.7 million in written premiums and covering roughly $2.6 billion in insured value across condominium properties.

Fabry said the program is meeting its intended goal of providing a backstop where private coverage is limited or unaffordable.

"The program remains strong and is achieving the goal for which it was reactivated," she said.

Beyond policies issued directly through the fund, officials said the program is also driving down costs across the broader insurance market by giving property managers leverage in negotiations. Since its inception, the fund has contributed to more than $12 million in total savings statewide. That includes about $4.7 million in savings from policies written through the fund, nearly $7 million in savings from private-market reductions influenced by HHRF quotes, and about $477,000 in combined savings.

Fabry provided examples where condominium buildings reduced premiums by tens or even hundreds of thousands of dollars after using HHRF quotes to negotiate with insurers.

Officials said the excess and surplus lines market has become more competitive in recent months, with premiums declining after sharp increases following the 2023 Lahaina wildfire. Before the wildfire, insurance costs averaged roughly 8 to 9 cents per $100 of property value. In its aftermath, some buildings saw costs spike to more than $1 per $100. Rates have since moderated, with some falling into the 20- to 30-cent range.

Officials said HHRF is playing a critical role in helping smooth the variability.

Meanwhile, the Hawaii Property Insurance Association is rolling out several updates aimed at addressing ongoing coverage gaps. The association increased its maximum coverage limit for certain non-lava-zone homes from $350,000 to $650,000, following approval from regulators in December.

It also has revamped its condominium unit-owner, or HO6, policy to better reflect rising costs and market needs. The updated product will offer up to $100,000 in dwelling coverage and $100,000 in loss-assessment coverage, aimed at helping condo owners cover high per-unit deductibles that can reach $50,000 or more.

The new policies are expected to be available for new business starting May 1, with renewals beginning June 1.

Officials said additional work is underway to develop a commercial property product for condominium buildings that would cover nonhurricane risks, though shifting market conditions have delayed that rollout.

In addition to hurricane coverage, lawmakers heard an overview of flood insurance in Hawaii, including an upcoming update to federal flood maps.

New maps are scheduled to be issued June 10, starting with Oahu, and are expected to expand designated flood zones. That could increase the number of property owners required to carry flood insurance.

Deputy Insurance Commissioner Jerry Bump said flooding presents unique challenges for insurers because losses are often widespread and simultaneous, making risk harder to spread.

Flood insurance is not included in standard homeowners policies and must be purchased separately, most commonly through the National Flood Insurance Program, a federal program administered by Federal Emergency Management Agency.

The program currently provides up to $250,000 in building coverage and $100,000 for contents — limits officials said are often below the cost to rebuild in Hawaii.

About 60,000 flood insurance policies are in force statewide, with private insurers accounting for less than 10% of the market.

Bump said flood insurance is typically required for properties in high-risk flood zones with federally backed mortgages, but he encouraged broader awareness as risks evolve.

"As we've recently seen, losses can be widespread and extreme," he said.

Lawmakers are expected to continue monitoring both hurricane and flood insurance markets as the state evaluates the long-term role of the relief fund and other stabilization efforts.