Top hurricane
insurer in isles
raises premiums 20%

Other providers have also
cited models showing higher
risks and costs since 9/11

Zephyr Insurance Co. Inc., the state's largest provider of hurricane insurance to local homeowners, has raised its rates by an average of about 20 percent.

The rate increase began Nov. 1 and affects Zephyr's approximately 65,000 policies in the state.

It was the first rate increase in Zephyr's four years in Hawaii, and follows local rate increases last year by other providers who cited higher costs and risk in the wake of the Sept. 11, 2001, terror attacks.

"The rate changes are the first in the company's four-year history, and have been implemented to help ensure that we are prepared to meet obligations to policyholders in the event of a catastrophe," said Richard Toyama, the company's president.

Zephyr said 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.

A spokeswoman said those models showed no "dramatic spike" this year, but a rate increase was overdue for Zephyr.

Most customers will see an increase of 20 percent in annual premiums, averaging about $7.50 a month.

Others are seeing higher increases, especially those who live in single-wall homes. Zephyr said risk models break out single-wall construction for the first time -- the predominant construction style for homes in the islands until about 40 years ago -- as a higher risk that warrants greater premiums.

Zephyr said replacement cost, another factor in risk models, is also increasing with the rapid appreciation of home values in Hawaii.

Some customers actually will see their rates decline, depending on the type of home construction and other factors. The rate change includes new credits for homes conforming to the Uniform Building Code that could result in lower rates for qualifying policyholders, the company said.

The industry paid record numbers of claims this year to customers who suffered property damage in a string of hurricanes that hit the East Coast.

Carolyn Fujioka, a spokeswoman for State Farm Insurance, said that should not have a direct impact on insurers here in the islands.

Although hurricanes strike the Hawaiian Islands only about once a decade, she said insurers' costs have been rising in the post-9/11 era, and insurers need to be sure that their rates are sufficient to cover claims.

"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."

Zephyr said policyholders can reduce their premiums by reinforcing their homes with hurricane clips and other protections to windows and other openings.