Brace for hurricane insurance pitfalls

THE ISSUE Hawaii's largest hurricane insurer is refusing to accept new hurricane policies on many older homes that have not been retrofitted.

THE force of Hurricane Katrina was felt quickly at Hawaii's gasoline pumps and now is beginning to shake the state's insurance industry. The largest hurricane insurer in Hawaii is shutting out new owners of many older homes, but that does not yet justify activating the state's dormant Hurricane Relief Fund.

Zephyr Insurance Co., which has about 70,000 policy holders in Hawaii, has decided to stop offering hurricane insurance to new owners of single-wall construction homes. It also will refuse to provide such insurance for homes built before 1981 unless they have been retrofitted with hurricane clips required by building codes adopted following Hurricane Iniki in 1992.

The state Legislature created the Hurricane Relief Fund in 1992 in response to the folding, departure and policy changes of insurance companies after receiving claims of more than a billion dollars. The fund was shut down four years ago, and the state has used interest and small amounts of its principal for disaster preparedness.

Outgoing Gov. Ben Cayetano in 2002 proposed spending the entire balance to cut the state's budget deficit, but Governor Lingle refused to touch the principal, now $182 million. The fund can be restarted without legislative action, but the Legislature may need to tailor it to fit today's need.

The insurance industry is reviewing its policies following 3.2 million claims totaling $60.5 billion last year for repairs from destruction caused by hurricanes Katrina, Dennis, Rita and Wilma. Four hurricanes in 2004 brought 2.1 million claims totaling $22 billion.

Homeowners in Florida have turned to the Citizens Property Insurance Corp., that state's hurricane relief fund, to seek coverage, resulting in the fund's $1.7 billion shortfall. The Florida legislature is considering bills to provide low-interest loans to people to retrofit their homes.

Reactivating Hawaii's fund would mean requiring the state to sell hurricane insurance to all policy holders. Taking that course would be premature at this point.