RELEASE DATE
February 4, 1999
Contact:Rep. Robert Herkes
Phone:(808) 586-6530

HOUSE COMMITTEE MOVES TO END HURRICANE RELIEF FUND

The House Committee on Economic Development & Business Concerns today unanimously passed House Bill 665, which calls for an orderly phase out of the Hawaii Hurricane Relief Fund over a two-year period. If adopted and signed into law, the measure could save Hawaiiís homeowners as much as $40 million a year in insurance premiums once separate hurricane policies are no longer required, according to Rep. Robert Herkes, committee chair.

The committee found that provisions of the fund, which was created as a temporary measure following Hurricane Iniki, are too limited and that the bulk of the premiums paid in are not kept in the state, Herkes said.

"Of the $70 million collected annually, $56 million goes out of the state to pay for re-insurance. The fund has a balance of $130 million, which is not enough to cover major hurricane damage," Herkes said.

Policies insured under the Hurricane Relief Fund are also limited. Not covered are damage from hurricane-generated high seas or heavy rainfall. "Neither are water spout activity nor high winds which are destructive, though not necessarily associated with hurricanes," Herkes noted. "The policies cover only direct hurricane damage."

Herkes also said that private insurance companies have shown an interest in returning to the Hawaii market to offer full homeowners coverage, eliminating the need for a separate Hurricane Relief Fund policy.

"With the departure of State Farm and other major carriers from the fund, itís future is in doubt anyway. Itís time to move on," he said.

HB 665 proposes to set aside $30 million from the fund to assist homeowners in hurricane-proofing homes via low-cost loans or direct grants. "The most important thing we can do now is to strengthen buildings to prevent damage to them and to surrounding properties. Any money left over will be used to mitigate losses from natural disasters," Herkes said.

Herkes acknowledged that insurance companies are opposed to phasing out the Hurricane Relief Fund. "They like the fund because the fund puts a cap on their potential losses from hurricane damage. Itís the taxpayers who are assuming the real risk. Homeowners with Hurricane Relief Fund policies are not guaranteed payment from hurricane damage," he said.

Homeowners in high-risk zones or high-risk structures are advised to strengthen their homes. For homeowners who are unable to obtain individual policies, state law requires the Hawaii Property Insurance Association (HPIA) provide them with insurance. Under HPIA, Hawaii insurance companies as a group provide the coverage, not the taxpayers, Herkes said.

HB 665 now moves to the Committee on Consumer Protection & Commerce. If it passes there, it will be sent to the Finance Committee.

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