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The state’s largest provider of hurricane insurance to local homeowners has raised its rate by an average of about 20 percent, the first rate increase in the company’s four years in Hawaii.
Zephyr Insurance Co. has about 65,000 policies in the state. The new rates went into effect on Nov. 1.
The increase follows local rate increases last year by other providers who cited higher costs and risk in the wake of the Sept. 11, 2001, terrorist attacks.
The rate increase will help ensure that the company is prepared to meet obligations to policyholders in the event of a catastrophe, said Zephyr president Richard Toyama.
The increase was driven mainly by updates to annual hurricane risk models that provide the industry with a basis on which to estimate losses – and costs – in the event of a hurricane.
Those models showed no “dramatic spike” this year, but a rate increase was overdue, said a spokeswoman.
Most customers will see an increase of 20 percent in annual premiums, averaging about $7.50 a month. Others, especially those who live in single-wall homes, will see higher increases. Single wall was the predominant construction style for homes in the islands until about 40 years ago. The company said this presents a higher risk and warrants greater premiums.
A few homeowners will see their rates decline. The rate change includes new credits for homes confirming to the Uniform Building Code that could result in lower rates for qualifying policyholders, the company said.
Hawaii has not seen a major hurricane since Iniki devastated Kauai in 1992. The state still has some $200 million on reserve in the Hawaii Hurricane Relief Fund, which was established after Iniki to provide hurricane insurance after private companies suspended hurricane coverage, and also to attract those private insurers back into the Hawaii market.
Carolyn Fujioka, a spokeswoman for Hawaii’s largest home insurer, State Farm Insurance, said large payouts resulting from the hurricanes that hit the East Coast this past year should not have a direct impact on insurers in the islands.
Insurers need to make sure rates are sufficient to cover claims, she said.
“It’s in people’s best interest to have rates that are adequate,” she said. “If they’re inadequate and insurers can’t pay claims, that does nobody any good.”
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