A resolution before a County Council committee next week seeks to control rising home insurance prices in Puna.
Puna Councilman Matt Kaneali‘i-Kleinfelder will introduce a resolution at the County Committee on Governmental Operations, Relations and Economic Development on Tuesday urging the Department of Finance to investigate options to lower home insurance premiums in Lava Zones 1 and 2.
Premiums have risen precipitously since the 2018 Kilauea eruption, and the Hawaii Property Insurance Association is the only provider to even offer new coverage in Lava Zones 1 and 2 after the eruption, Kaneali‘i-Kleinfelder said.
And with no competition, HPIA’s prices are on the rise.
“It used to be a homeowner would be paying $1,200 to $1,400 a year for home insurance,” Kaneali‘i-Kleinfelder said. “But now you have some people paying more than $4,000 or $5,000.”
Leilani Estates resident Robert Golden said he has maintained home insurance coverage through Atlas Insurance Agency, although his premiums have increased since the eruption. However, he added that Atlas is not offering new coverage since the eruption, leaving prospective homeowners no choice but to use HPIA.
Julie Hugo, real estate agent with Venture Sotheby’s International Realty in Hilo, said prospective homeowners in Puna are being priced out by insurance rates that are unreasonably high for an area that otherwise has relatively low home prices.
“In Puna, a $250,000 home is affordable and you can get three bedrooms, but if you’re also paying $4,000 a year for insurance, then that’s another calculation that impacts the price of the home for people,” Hugo said. “It’s a real shame, and I think it needs more attention.”
The issue is widespread throughout the district: More than 50% of all parcels in Puna are within Lava Zones 1 or 2.
In order to address the issue, Kaneali‘i-Kleinfelder said the Department of Finance should begin a study of how the county could control coverage costs, and present its conclusions to the County Council by the end of October.
Kaneali‘i-Kleinfelder specifically named the possibility of a “captive insurance company,” wherein an organization owns a licensed insurance company as a subsidiary to provide coverage for only itself. Captive insurance companies are widely used in several U.S. states including Hawaii in order to avoid the volatile pricing of commercial companies.
As of the beginning of this year, 242 captive companies were active in Hawaii.
In principle, Kaneali‘i-Kleinfelder said a captive company would allow the county to set a cap on how high insurance premiums can go, keeping them affordable. However, he added, the Department of Finance will have to run the numbers closely to determine whether such an organization is financially feasible — and how much it will have to pay out in the event of another eruption.
Kaneali‘i-Kleinfelder added that the county was allocated $23.72 million in U.S. Department of Housing and Urban Development Community Development Block Grant Disaster Recovery funds that could potentially be used to assist homeowners.
“It’s just good social policy for the county to ensure people can afford insurance for their homes they’re paying for,” Kaneali‘i-Kleinfelder said.