Hurricane Insurance in Hawaii

Hurricane insurance is one of the most challenging aspects of the Hawaii property insurance market. The islands face significant hurricane risk, yet private market capacity is limited and expensive.

Hawaii Hurricane Risk

Hawaii is vulnerable to hurricanes originating in the Eastern Pacific:

Hurricane Season

• Official Season: June 1 - November 30
• Peak Activity: August - September
• Threat Level: Category 1-5 hurricanes possible
• Historical Impact: Major hurricanes have caused billions in damages

Notable Hawaii Hurricanes

Hurricane Iniki (1992) was the turning point that led to creation of the original Hawaii Hurricane Relief Fund. The storm:

• Made landfall on Kauai as Category 4
• Wind speeds 145 mph
• Destroyed over 1,400 homes
• Damaged 5,000+ additional homes
• Caused $3.1 billion in insured losses (1992 dollars)
• Led to multiple insurer insolvencies

After Hurricane Iniki, private insurers dramatically reduced hurricane coverage in Hawaii, creating the need for state intervention.

The Hawaii Hurricane Relief Fund (HHRF)

The Hawaii Hurricane Relief Fund is a state-backed insurance program providing hurricane coverage for high-value properties unable to obtain adequate private insurance.

HHRF History

Original HHRF (1993-2009)

• Created after Hurricane Iniki destroyed private market
• Provided hurricane coverage when private insurance unavailable
• Wound down as private market returned
• Officially closed in 2009

HHRF Reactivation (2024-2026)

• Reactivated in 2024 due to condo insurance crisis
• Senate Bill 1044 (2025): Expanded HHRF to cover condos and commercial properties
• Response to 500-1000% premium increases
• Temporary 5-year program to stabilize market

The Condo Insurance Crisis (2023-2025)

Beginning in 2023, Hawaii experienced a severe condo insurance crisis:

The Problem:

• Hurricane insurance premiums skyrocketed for high-rise condos
• Example: One Waikiki building's premium went from $235,000 to $1.2 million
• Deductibles increased tenfold
• Many insurers withdrew from Hawaii market entirely
• 375-390 buildings estimated to be under-insured

Causes:

• Climate change increasing hurricane frequency and severity
• Catastrophic losses in other markets (Florida hurricanes)
• Reinsurance costs soaring
• Aging buildings requiring higher replacement costs
• Limited market competition

Legislative Response:

• Governor Josh Green reactivated HHRF in 2024
• Senate Bill 1044 passed in 2025
• Authorized HHRF to provide excess coverage for condos and commercial properties
• Temporary 5-year program (2025-2030)

HHRF Coverage and Eligibility

Eligibility Requirements

To qualify for HHRF coverage, properties must meet ALL criteria:

1. Property Type

• Condominiums (Association of Apartment Owners - AOAO)
• High-rise residential buildings
• Commercial properties (case-by-case)
• Properties in Hawaii with hurricane exposure

2. Total Insured Value

• Minimum $10 million total insured value (TIV)
• Applies to entire building/property
• Includes building, improvements, and fixtures
• Based on replacement cost valuation

3. Private Market Denial

• Must be denied hurricane coverage by at least 2 state-licensed insurers operating in Hawaii
• Denials must be documented in writing
• Insurers must be authorized to write property insurance in Hawaii
• Surplus lines insurers do NOT count toward 2-insurer requirement

4. Primary Coverage

• Must maintain primary hurricane coverage up to $10 million
• Primary policy from admitted insurer or surplus lines
• HHRF provides ONLY excess coverage above $10M
• No coverage for first $10M of losses (primary layer)

Exam Tip: HHRF provides excess coverage only. Properties must have primary coverage for the first $10 million in hurricane losses. HHRF covers losses ABOVE $10 million up to policy limit (maximum $140 million).

HHRF Coverage Structure

Coverage Layers

Example Coverage Structure:

• Building replacement cost: $80 million
• Primary coverage: $10 million (private insurer)
• HHRF excess coverage: $70 million ($10M - $80M)
• Total available coverage: $80 million

Covered Perils

HHRF covers hurricane damage only:

Covered:

• Wind damage from hurricanes and tropical storms
• Rain damage during hurricanes
• Storm surge and hurricane-driven flooding
• Flying debris and windborne objects
• Structural damage from hurricane forces

NOT Covered by HHRF:

• Earthquakes
• Volcanic eruptions
• Tsunamis
• Fire (unless caused by hurricane)
• General flooding (see NFIP)
• Non-hurricane windstorms

HHRF Policy Limits

Maximum Coverage:

• Maximum HHRF Policy: $140 million excess coverage
• Combined with Primary: Total up to $150 million ($10M primary + $140M HHRF)

Most Properties:

• Typical HHRF policy: $20M - $80M excess coverage
• Depends on building replacement cost and exposure
• Higher limits for larger/more expensive properties

HHRF Application Process

Step 1: Obtain Private Market Denials

• Request hurricane coverage quotes from at least 2 Hawaii-licensed insurers
• Document written denials or unaffordable quotes
• Keep records of insurer names, dates, and reasons for denial

Step 2: Secure Primary Coverage

• Obtain primary hurricane coverage up to $10 million
• May use admitted insurer or surplus lines market
• Primary policy must be in force before HHRF application

Step 3: Submit HHRF Application

• Complete HHRF application through Hawaii Property Insurance Association (HPIA)
• Provide documentation:
  • Property replacement cost valuation
  • Private insurer denials (at least 2)
  • Primary coverage policy declarations
  • Building information and risk details
  • AOAO/owner financial information

Step 4: HHRF Underwriting

• HPIA reviews application for eligibility
• May require property inspection or additional information
• Determines appropriate excess coverage limits
• Calculates premium based on exposure and primary coverage

Step 5: Policy Issuance

• If approved, HHRF issues excess hurricane policy
• Policy coordinates with primary coverage
• Premiums paid to HPIA/HHRF
• Annual renewal required (up to 5 years)

HHRF Premiums and Costs

Premium Factors:

• Building replacement cost
• Location and exposure (coastal vs. inland)
• Construction type and age
• Hurricane mitigation features
• Deductible selection
• Amount of excess coverage needed

Typical Premiums:

• Generally more affordable than private excess market
• Subsidized by state guarantee
• Still substantial cost for high-value properties
• Example: $50M excess coverage might cost $300K-500K annually

Deductibles:

• Typically percentage of insured value
• 2% - 5% deductibles common
• Applies to HHRF excess layer only
• Primary coverage has separate deductible

Private Hurricane Insurance Market

While HHRF provides excess coverage for high-value properties, most Hawaii properties still rely on private market hurricane insurance.

Private Market Challenges

Limited Capacity:

• Few insurers willing to write hurricane coverage in Hawaii
• Those that do impose strict limits and high premiums
• Coastal properties especially difficult to insure
• Newer buildings generally more insurable than older

High Premiums:

• Hurricane coverage adds 30-100% to property insurance premiums
• Coastal properties pay substantially more
• Recent premium increases of 20-50% annually common
• Some properties now effectively uninsurable in private market

Large Deductibles:

• Percentage deductibles typical (2%-5% of insured value)
• Example: $1 million home with 2% deductible = $20,000 hurricane deductible
• Separate wind/hurricane deductible from general deductible
• Some policies have $25,000-50,000+ minimum deductibles

Hurricane Coverage in Homeowners Policies

Standard Homeowners (HO-3):

• Most include hurricane/windstorm coverage
• May have separate hurricane deductible
• Some insurers exclude hurricane coverage entirely
• Coverage limits typically match dwelling coverage (Coverage A)

Coastal Properties:

• Many insurers will not write new policies
• Existing policies may not be renewed
• Wind/hurricane coverage often excluded
• Separate wind policy required (if available)

Condo Unit Owners (HO-6):

• Master policy covers building structure
• HO-6 covers unit improvements and contents
• Unit owner responsible for master policy deductible (Loss Assessment coverage)
• Unit owners affected by master policy availability and cost

Surplus Lines for Hurricane Coverage

When admitted insurers won't provide hurricane coverage:

Surplus Lines Option:

• Non-admitted insurers can provide coverage
• Higher premiums and deductibles typical
• No Hawaii Insurance Guaranty Association protection
• Licensed surplus lines broker required
• Subject to surplus lines tax (4.68% in Hawaii)

Advantages:

• May be only option for difficult-to-place properties
• More flexible policy terms
• Can write higher limits

Disadvantages:

• More expensive premiums
• No guaranty fund protection if insurer becomes insolvent
• Less regulatory oversight
• May have more coverage exclusions

Producer Responsibilities for Hurricane Insurance

Advising Clients

Disclosure Duties:

1. Explain Coverage Limits: Make sure client understands hurricane coverage limits and deductibles
2. Discuss Exclusions: Identify what is NOT covered (flood, earthquake, etc.)
3. Explain Deductibles: Hurricane deductibles typically much higher than standard deductibles
4. Review Alternatives: Discuss HHRF for eligible properties, surplus lines options
5. Document Declinations: If client declines hurricane coverage, document in writing

Hurricane Coverage Assessment:

• Review building location and exposure
• Assess replacement cost accurately
• Consider hurricane mitigation features
• Discuss flood insurance separately (NFIP)
• Explain coordination with condo master policy (if applicable)

HHRF Application Assistance

For eligible clients (condos/commercial properties over $10M):

1. Evaluate Eligibility: Determine if property meets HHRF requirements
2. Obtain Denials: Help client request quotes and document denials from 2+ insurers
3. Coordinate Primary Coverage: Assist in placing $10M primary hurricane coverage
4. Complete HHRF Application: Work with HPIA to submit complete application
5. Review HHRF Policy: Explain excess coverage terms, limits, and coordination with primary

Important: HHRF is complex commercial coverage. Producers should have commercial lines expertise and be comfortable with layered coverage structures.