State may end
hurricane fund

A House plan would halt relief
coverage in two years and allot
$30 million to help storm-
proof isle homes

By Mike Yuen
Star-Bulletin

The state's hurricane relief fund can be dismantled because private insurers are again starting to provide hurricane coverage, House Economic Development Chairman Robert Herkes says.

But before the fund is phased out, Herkes (D, Volcano) wants $30 million of the fund's $130 million made available to isle homeowners to strengthen their homes to lessen the chances of hurricane-related damage.

As a result, Herkes is drafting legislation that combines his proposal with a somewhat similar measure introduced by Gov. Ben Cayetano. The new draft is scheduled to be presented to the House Economic Development Committee on Thursday.

Herkes said he'll follow Cayetano's recommendation that 99 percent of the fund's remaining money be placed in an emergency natural disaster relief fund, while the remaining 1 percent would go to a natural disaster loss mitigation fund, which would be used for prevention efforts.

But unlike Cayetano, Herkes wants a faster pace for phasing out the Hawaii Hurricane Relief Fund. Instead of the three years envisioned by Cayetano, Herkes wants the fund's shutdown completed in two.

"As policies in HHRF expire, you're on your own," Herkes said. "The private sector should be taking care of you."

The state got into the hurricane insurance business after Hurricane Iniki plowed through Kauai nearly 6-1/2 years ago. Insurance companies, faced with $1.6 billion in claims, virtually stopped providing hurricane coverage. That put homeowners in a bind, since their mortgage lenders usually required hurricane protection.

The Hawaii Insurers Council, the trade group representing property and casualty insurance companies, opposes the shutdown of the fund.

"If the fund is terminated, there will again be some difficulty for consumers in buying homeowners insurance as insurance companies find their surplus overexposed and seek to limit the number of policies written in Hawaii," Paul Ables, the council's legislative chairman, told Herkes' panel yesterday.

Herkes' rebuttal: "Naturally insurance companies don't want HHRF to go away. Their losses are capped (under the fund)."

The fund was always intended to be a temporary solution to unavailability of hurricane insurance, said Amori Ogata, the fund's executive director.

Herkes said taking $30 million from the fund to be used as grants to help people who cannot afford to hurricane-proof their homes will help ease the concerns of companies that might be fearful of underwriting hurricane policies in the isles.

Under what Herkes envisions, homeowners with "an economic situation that prohibits you from borrowing the whole amount" would be able to borrow the money they need to pay their hurricane-mitigation work and have as much as 50 percent paid by the state.

"The important thing to remember is that your home might be solid, but the home next to yours might not be. You're at risk from that home next to you if the roof blows off and smashes into your house. So we have to mitigate the danger."

Moreover, the grants are a way of getting taxpayers' money back into their pockets, Herkes said.

The hurricane relief fund's revenue comes from a fee on mortgages recorded in Hawaii, premiums from the fund's insurance policies and an annual assessment on private insurance companies.