THE Hawaii Hurricane Relief Fund has served only part of its purpose. The rest of its mission is still a work in progress.
still has purpose
Helping homeowners become aware of the risks of property damage and personal injury, and steps they can take to reduce those risks -- hazard mitigation -- is the rest of the story.
That is required by statute in addition to providing "temporary" coverage.
HHRF has spent considerable money and effort in this regard. Last year's Legislature passed a bill requiring further study on hazard mitigation.
Other coastal states and the Federal Emergency Management Agency (FEMA) are focusing their efforts on prevention of disaster losses, not just post-event Bandaids. FEMA has recently awarded three of our counties over $1 million in project impact grants to do hazard mitigation.
Such efforts are already under way on Maui, Kauai and the Big Island. Oahu is next. Other states like Florida require insurers to provide incentives for homeowners who take steps to reduce risk.
In Hawaii, however, State Farm and Liberty Mutual provided homeowners with yearly premium reductions for hazard mitigation investments while their policy holders were with the HHRF. But after they pulled their policy holders out of HHRF, they also pulled the rug out from under those homeowners who had installed hurricane clips and storm panels.
Reducing risk of future hurricane losses benefits everyone in the long run, including insurers. That's why over 75 international insurers formed the Institute for Building and Home Safety to promote hazard mitigation.
Only a few thousand of our over 200,000 single-family houses and townhouses built before the current building codes were instituted have been retrofitted so far. The risk isn't better than before Iniki.
Homeowners aren't really any better off, and are potentially worse off. Waiting for the more stringent building codes of the 1990s to produce significant housing stock improvement will take another 25-35 years or more. Older housing stock is getting riskier with age.
SO don't bet that history won't repeat itself when we have the next hurricane and another mass insurer pullout of the hurricane insurance market. Only the insurers and reinsurers are in somewhat better shape than they were after Iniki in 1992. They've been able to raise hurricane claim deductibles to about $2,500-$3,000 average per home. But they still face significant if not devastating losses if a big storm hits Oahu.
Merely rebating part of the HHRF's trust fund will do nothing to reduce the risk of a hurricane insurance crisis in the future. We need to provide incentives to meaningfully reduce the risk of catastrophic losses.
The trust fund seems large, reportedly $150-170 million. Interest alone from this fund could be used to provide rebates and incentives like matching grants or tax credits. Combined with public awareness campaigns and private insurer co-operation as in Florida, the incentives could over time significantly harden our fragile housing stock.
Governor Cayetano, our current and past insurance commissioners, and legislative leaders have up to now supported continuing action on hazard mitigation.
We hope that merely cutting off availability of state provided hurricane insurance isn't now seen as the end game. It's not time to cash in the chips and go home. That would be short sighted.
Gerald Peters is president of Hurricane Protection
Systems and coordinator of the Hazard Mitigation
Ad Hoc Task Force 2000.