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Catastrophes around the U.S. and World are driving up condo insurance rates and property premiums everywhere and Hawaii is no exception.  Condo and property insurance rates are on the rise, I learned more about this at the West Hawaii Association of Realtors general membership meeting with Joshua German CIRMS as our guest speaker with Insurance Associates, Inc. from Oahu. Insurance Associates  has been writing insurance for Community Associations across Hawaii longer than any other insurance carrier in the islands. Joshua discussed how the rise in reinsurance (the insurance companies purchase to further spread their risk) has affected the ability of carriers to continue to do business because companies can take on more risk with reinsurance but they must stay solvent under U.S. regulations so they can meet their obligations to ceding insurers. Reinsurance costs have been going up significantly since 2017 due to increased catastrophic events like social inflation and other natural disasters. This means that the insurance carriers capacity has decreased so that multiple insurance carriers would be needed to fully insure some condominiums. In the U.S. last year there were over 28 catastrophes while adding the Lahaina fire over $3 Billion in property losses.

 

New Underwriting Guidelines

New tightened underwriting guidelines have emerged with rate increases over the years. Many older buildings will not be insurable from some carriers without updated ordinances like fire sprinklers and/or aging pipes. DB Insurance (aka Dongbu Insurance) who managed many properties in Hawaii had to reduce their total insured value by 20% this year and 10% in 2025 which affected many association not getting renewed. Premiums for wood frame and joisted masonry condominiums have increased renewable premiums 50%-70%. Old terms like blanket limits, set deductibles like $5000, and % set hurricane deductibles have new terms like scheduled limits per building, a $25,000 deductible is now common, 5% wind/hail damage deductible, per roof deductible, building valuations are being scrutinized and increased to reflect current construction costs.See articles revolving around legislative action (current session came to a close May 3rd 2024) on skyrocketing insurance costs. SB 3234 SD 1 HD2 HB2686 HD1 SD2

How will this affect individual homeowners policies and HO6 condo policies? German stated in the meeting that residential property owners need to check their policies now and what their replacement costs show as beware in 2025 policy premiums for residential owners will see significant policy annual increases up to 50%.

Even today Individual owners have been struggling to secure coverage for their units as prices rise and insurers rethink their appetite. Wildfires like the Lahaina wildfire and other climate impacts – wind chief among them – are both biting, as are US and worldwide inflationary and reinsurance trends. In a Civil Beat article by Jen Frost Mar 01, 2024

Hawaii Governor Josh Green quoted, “We’ve got 89,000 short-term rentals in the state of Hawai’i of which only 14,000 are legal.” This even blows my mind personally.

Condo Property Insurance Rates On the Rise

If your in a community with an active HOA ask questions of your board. Find out whats happening and how your community could be affected with the rising rates. Also as a homeowner contact your insurance carrier and check your policy replacement costs whether its enough and you have all the applicable coverage you need.

There are many moving parts surrounding the housing crisis for locals and affordability including the rising insurance premiums. These insurance challenges come as Hawaii’s Governor is engaged in a showdown with short term rental unit owners.  Stay tuned as the housing and insurance crisis peels back its ugly head and how the Governors possible action implementing a 24 month plan, set to kick off in fall, will see a tax amnesty granted to short term rental unit owners that sell to locals or convert to a long-term arrangement aimed towards mainland investment property owners possibly can shift the use so locals have a place to live and call home.

Until Next Time A Hui Hou!

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