Hawaiʻi County Council urges state to help stave off potential homeowners insurance crisis in Puna

As recovery progress is being made slowly but surely five years after the unprecedented 2018 lower East Rift Zone eruption of Kīlauea volcano, homeowners in that Big Island district now have a new problem to deal with: the cost and availability of homeowners insurance.

In July, the Hawaiʻi Department of Commerce and Consumer Affairs said Florida-based Universal Property and Casualty will get out of the homeowners, condominium and renters insurance market in the islands.

The insurance company will begin by not renewing policies with a Sept. 1 anniversary date. The total withdrawal from the market will occur during the next 13 months, with the last policies to be effective Aug. 31, 2024.

About 1,500 policies will be affected statewide, with 1,000, on them on the Big Island, including 900 for properties located in lava zones 1 and 2. That leaves many Puna residents with only one alternative for finding insurance, the Hawaiʻi Property Insurance Association.

The unincorporated association of insurance providers throughout the state was created in 1991 to provide basic property insurance at a reasonable and appropriate price for people in lava zones 1 and 2 unable to get homeowners coverage in the private market.

However, some Puna residents who were Universal customers are finding the association’s rates to be four to 10 times higher, according to Eileen O’Hara, president of the Hawaiian Shores Community Association board of directors and former County Council member, who testified during a Council committee meeting Aug. 15

Premiums as high as those quoted by the state association not only would hinder continued eruption recovery efforts, they could force a mass exodus from the region as they combine with home prices that have only increased in Puna since the COVID-19 pandemic.

The state association also doesn’t cover commercial entities, meaning businesses and even homeowners who operate businesses out of their homes would be left without policies.

In an effort to stymie the potential crisis before it unfolds, the Hawaiʻi County Council on Sept. 6 adopted Resolution 223.

The measure, which was introduced by Puna Councilwoman Ashley Kierkiewicz, urges state lawmakers, the Hawaiʻi Department of Commerce and Consumer Affairs and Hawaiʻi Property Insurance Association to address insurance accessibility on the Big Island, particularly in lava zones 1 and 2.

The resolution asks the state to expand the association’s coverage to include commercial properties, implement subsidies or offer financial aid to mitigate the financial burden of higher premiums for residents in those lava zones and explore the creation of a risk pooling mechanism.

“This is what I feel we can do as a body in what seems to be sometimes a very helpless situation,” Kierkiewicz said during an Aug. 15 Council committee meeting. “We can at least provide solutions and direct those who have the authority to provide immediate support to our community.”

Puna residents and Council members also warned that if the cost of coverage is allowed to spike in just those areas on the Big Island, similar increases are more likely in other locations for other natural disasters.

“This is a big deal,” Kierkiewicz said.

O’Hara testified that in some cases current Universal policyholders could pay more than $7,000 for a policy with the state association, and that doesn’t include supplemental hurricane insurance that is about $1,000 more.

Les Frey and his wife Suzanne have lived in Hawaiian Shores for about 11 years. They were Universal customers, paying $1,345 a year, including hurricane insurance, for coverage.

After their policy was terminated, the quote they received from the Hawaiʻi Property Insurance Association was $5,700 plus the extra $1,000 for hurricane coverage, increasing their annual cost by $5,355.

“These are the highest rates not only in Hawaiʻi but in the country,” Frey told Council members during the committee meeting. “If you start checking in Florida and the Gulf Coast, we’re in line with all of that.”

Suzanne Frey testified that with housing now unaffordable and scarce for many people, one stroke of a pen has made housing in Puna beyond the reach of most.

“No one can all of a sudden just whip out six grand every year to pay for insurance that they haven’t had to pay before,” she said. “Most people here are getting by month-to-month.”

OʻHara said the increases were “not reasonable” and that insurance companies should not be allowed to recoup losses in the short term on the backs of the poorest sections of the Big Island.

“It will result in thousands of foreclosures, as folks with mortgages must carry insurance,” she said. “Those foreclosures will start this September, yet the state will not act until next year.”

Kierkiewicz said during the committee meeting that people on fixed incomes also would have a hard time paying potentially $600 or $700 a month for coverage. People are having a hard time keeping up with the costs of daily life as it is and many are using their tax refunds to pay for insurance.

“Folks often ask, and I’ve read some testimony and some of it’s pretty harsh, why do people live there?” Kierkiewicz said during the Sept. 6 Council meeting. “There are deep ancestral and cultural ties to that area. It is also one of the most affordable places left to live in Hawaiʻi.”

Homes in Puna sell for half or even sometimes less than the median price of a home in Honolulu, which has topped $1 million. The district also offers a country-like lifestyle and a relatively short commute to Hilo for work and services.

It’s also beautiful — the word “puna” means to spring forth. The Councilwoman said there’s a lot of incredible, creative energy in the region and the lifestyle is bar none.

“So for generations, people have lived in Puna with Tutu Pele,” Kierkiewicz said. “They’ve recognized where they are and they are able to work in concert with ʻāina and what happens.”

O’Hara said some of the very households that lost their homes to the 2018 lava flow and moved back to Puna could now lose them to foreclosures because of the unfolding insurance situation.

“The [Hawaiʻi] Legislature really needs to step up and put these insurance companies in place and let them know that either they insure everyone or they don’t, but they cannot discriminate based on your address,” Suzanne Frey said.