Hawaii's Property Insurance Market: Navigating Rate Hikes Amid Wildfires
Hawaii's property insurance market is undergoing significant rate adjustments due to recent wildfire exposures, rising reinsurance costs, and broader economic inflationary pressures. Insurers secured approvals for over 20 rate increases on homeowner policies last year, with many exceeding 10%, and some hikes reaching nearly 32%. This reflects the impact of AI-driven prior authorization delays, regulatory compliance requirements, and evolving market conditions.
Impact of Economic Factors and Wildfires
Chris Draghi, an AM Best director, highlights the influence of economic variables, risk concentration, and changing weather patterns on property rates. The wildfires of 2023, which devastated over 2,200 structures, have forced a comprehensive reassessment of risk management within the insurance industry. Consequently, homeowners' multiperil premiums in Hawaii rose by 13.38% in 2024, totaling $562.2 million according to state insurance commissioner's reports, while losses and claims decreased significantly to $365.2 million from $1.16 billion the previous year.
Insurance Providers Respond to Market Dynamics
State Farm, the leading homeowner insurance carrier in Hawaii, implemented a 28.5% rate increase on November 15 for hail, wind, and hurricane coverage under its Hawaii Homeowners Program via State Farm Fire and Casualty Co. This affects approximately 98,970 policyholders, adding $45.5 million in premiums, with some policyholders experiencing increases up to 48.4%. Similarly, RLI, ranked fifth in the state, reported a 33% premium increase with a 16% rate hike, while RLI Insurance Co. enacted a 10.7% comprehensive rate increase starting October 1. These actions reflect strategic underwriting and claims adjustments in response to escalating risks and compliance mandates.
Legislative and Market Changes
Hawaiian lawmakers are examining House Bill 589 to establish the Hawaii Condominium Mutual Insurance Co. by January 1, 2027, aiming to support condominium owners in securing insurance amidst existing market challenges. Additionally, soaring reinsurance costs have compounded rate adjustments, with Ocean Harbor Insurance Cos. reporting a 62.8% annual rise, leading to Hawaiian Insurance and Guaranty Co. Ltd. executing a 31.9% increase in hurricane and risk coverage. Further impacting the market, DTRIC Insurance Co. Ltd., a property and casualty provider in Hawaii, is exiting market operations, shifting to runoff without issuing new homeowners policies as of November.