In the recent “Hawaii Affordability Survey” researchers found a starting 70% of 1,500 local workers interviewed are either planning to move away or considering it. Just last year alone, according to the U.S. Census Bureau, Hawaii had a net loss of almost 4,300 people — our friends, family and neighbors. Cumulatively over decades, we’re looking at tens of thousands of Hawaii residents who’ve already left the state. The reason for many of them leaving has to do with the high cost of living.
In 2024, adding to Hawaii’s inflation woes — which is higher here than in most parts of the mainland — is the skyrocketing homeowner’s insurance that has risen by 50% for many single-family homes and as high as over 1,000% for some condos and townhouses. This came as a surprise for many Hawaii property owners who found themselves sticker shocked over their newly adjusted bills.
Remember, this is not an option to carry homeowner insurance or not to purchase it. Anyone with a mortgage requires that homeowners carry adequate property insurance to cover the value of their home to be rebuilt in the case of a fire or other disaster.
In the case of condo and townhouse owners, the situation is more dire because insurers of their buildings have raised rates so high that some buildings are not able to afford 100% coverage. Building associations have been forced to raise their association-maintenance fees to close the gap in the buildings newly adjusted insurance rates. Therefore, condo-townhouse owners have been hard hit with sudden fee hikes anywhere from a few additional hundreds to over a thousand dollars per month. Yes, that’s per month. Tens of thousands of Hawaii residents living on a fixed budget find themselves unable to absorb such prices. Some are planning to sell and move off the island. Others need to take out personal loans.
Over the past year, Hawaii condo associations have seen one-year premium increases of 300% to 600%, which is four to seven times the previous cost, says Elaine Panlilio, AOAO Group Unit manager at Atlas Insurance Agency. A few buildings are looking at increases of 10 to 14 times the amount of the previous year’s bill.
Only three insurers are offering master policies for condominiums, which cover often limited coverage, which means in addition to raised association-maintenance fees, some condo owners must purchase additional insurance to meet mortgage requirements, or their condo association must purchase additional insurance to close the gap, in what’s called surplus lines of insurance, which tends to be higher than the master policy premiums.
State Response
Realizing the widespread problem, Gov Josh Green and the State Legislature proposed to restart the state-managed Hawaii Hurricane Relief Fund and expand it to allow condos to get coverage, but House Bill 2686 failed to make it out of conference committee in the last days of the session.
The state must also contend with the risk of insurers pulling out of Hawaii. In preparation for a potential decline in the availability of insurance within the Hawaii market, discussions are ongoing to expand the Hawaii Property Insurance Association (HPIA) and its capacity to take on new business. The Hawaii Insurance Division also continues to actively work with insurers to maintain availability of coverage and affordable options in compliance with statutory mandates.
Nationally, the reinsurance market has already been going up the past several years, but the situation has been exacerbated in part due to the Lahaina wildfires that has insurers reevaluating their risk exposure and affordability to offer coverage. Some insurers have already stopped offering coverage and others hiked their rates.
Experts in the insurance industry are already saying the elevated rates will be here to stay as long as risk remains. In other words, for rates to go back down, there cannot be catastrophic disasters like the Lahaina wildfires happening for a while. The Maui wildfires caused an estimated $5.5 billion in damage to Lahaina and Kula. But even in the absence of weather-related calamities in Hawaii, this might not be enough for rates to come back down because climate-related disasters are occurring throughout the U.S. impacting the cost of insurance nationally.
The global reinsurance market experienced over $100 billion in losses for the fourth consecutive year in a row, and due to the increase in worldwide climate events, reinsurance rates nationwide have increased as much as 50 percent per year in recent years, and these increased costs have largely been passed on to policyholders.
For those underestimating the effects of climate change, clearly, we see it to be a massive problem that not only hurts the communities devasted by natural disasters, but in this case, property owners, as well as renters who also could see rental hikes due to rising insurance costs.
It is a troubling situation for many who already struggle to keep up with the state’s high cost of living. The insurance hikes are a crisis that we’re only seeing unfold in the beginning stages. How will it impact the local real estate market? How will it influence more Hawaii workers to leave the state, and thus, the Hawaii economy itself?
The Hawaii State Legislature must revisit this issue in 2025 and make finding alternative solutions a priority.
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