Bank warns people to avoid HIG
Bankoh tells customers of Hawaiian Insurance & Guaranty to seek policies elsewhere
Since Hawaiian Insurance & Guaranty Co. Ltd.'s parent company had its bond rating downgraded in March, the isle insurer has lost about 5 percent of its policyholders, who have been instructed by their insurance agents and lending institution to move their business to other firms.
Although HIG is stable, its parent company, Vesta Insurance Group, has been struggling in the aftermath of the fierce Atlantic storms of recent years, which have wreaked havoc on areas in Louisiana, Florida, Alabama and Mississippi. Reflecting Vesta's financial situation, HIG's bond rating has been downgraded to a C+, currently considered too low to meet some mortgage lending requirements.
Earlier this month, First Hawaiian Bank, American Savings Bank and Central Pacific Bank sent out letters instructing HIG-insured mortgage holders to meet with their insurance agents to discuss the downgrade. However, Bank of Hawaii has instructed HIG policy holders to seek another insurer.
Bank of Hawaii was adhering to investor guidelines set by Fannie Mae and Freddie Mac and internal policy when it issued its consumer directive, said Stafford Kiguchi, a spokesman for the bank.
"We consider this good internal policy since a B rating or better is a stronger indication of the insurance provider's capacity to pay the bank and protect our customers in the event of a claim," Kiguchi said.
The bank would be open to reviewing a change in status should HIG obtain a better AM Best rating, he said.
HIG is working with regulators to get its bond rating up, and Vesta is working on its capitalization, said Ernest Fukeda Jr., HIG's president.
"We're very solid, and we can survive this drop in business," Fukeda said.
State Insurance Commissioner J.P. Schmidt said he is working with other state agencies to bring Vesta and HIG -- the state's fourth-largest insurer -- back up to speed, and expects all issues to be resolved within the month. However, at this time, "it would be prudent for customer to begin looking at other insurance companies at this point and begin getting quotes," Schmidt said.
The Hawaii marketplace, which has added two new hurricane insurers and is expected to get a third on June 1, should be able to accommodate any of HIG's 30,000 or so clients that need to switch firms, he said.
"We have three new insurers in the Hawaii market, and I believe that they will be able to pick up the slack and provide coverage," Schmidt said.
AAA Hawaii -- better known for its automobile and travel services -- and Korea-based Dongbu Insurance Co. Ltd. have entered Hawaii this year, and ICAT -- International Catastrophe Insurance Managers LLC -- will be coming soon to alleviate pressures put on the marketplace by HIG's bond rating and a decision by Zephyr, the state's No. 1 hurricane, to issue more restrictive guidelines, he said.
Zephyr, which insures about 70,000 Hawaii homeowners, quit selling new insurance policies in April to owners of single-wall construction homes. Zephyr's guidelines also rendered homes built before 1981 not eligible unless they had been retrofitted with hurricane clips to meet new building codes.