Hawai'i Condo's: Property Insurance
Since January 2025, the insurance market in Hawai'i has been in a state of turmoil. We are in a Hard Market where insurance companies have stricter underwriting guidelines and offer less-desirable terms with higher premiums. What is going on?!
Disasters & Global Reinsurance Costs
In the last several years there has been a spike in large natural disaster claims across the United States and around the world. Between 1980, and 2023, there was an average of 8.5 events per year that caused over $1 billion of damage in the U.S. (adjusted for inflation). In the most recent 5 years (2019-2023) the average number of Billion Dollar Disasters increased to an average of 20.4 per year. In the last two years alone there have been 46 large events that caused approximately $271 billion in damage. These disasters as well as others around the world like wildfires in Australia, flooding in Germany and the earthquake + tsunami in Japan have caused global reinsurance rates to increase significantly to cover these claims.
What is Reinsurance?
In simple terms, reinsurance is insurance for insurance companies. They purchase reinsurance to enable them to cover catastrophic claims such as hurricanes, floods, and wildfires. Largely due to natural disasters around the world and close to home, reinsurers have been losing money and must raise rates to stay solvent. Of the 50 largest reinsurance groups, 17 of the top 50 reinsurers had combined ratios over 100% in 2022. This means they were paying more in losses and expenses than their earned premiums before the disasters of 2023, including the Maui wildfires.
Why is Hawai'i Being Affected?
Hawai'i has a few unique challenges that are not appealing to underwriters. [We] are at risk of being hit by hurricanes, and Hawai'i is not a very large market--California and Texas each have about 25 times the number of associations compared to Hawai'i. Also, Hawai'i has a lot of buildings built in the 1960's and 1970's that need updates. Many of these buildings are near the shoreline leading to serious concerns about maintenance and structural integrity after the collapse of a beachfront condo in Florida in 2021. Additionally, until recently most companies did not contemplate the threat of wildfires in Hawai'i.
How Hawai'i Insurance Companies are Responding
Every insurance company doing business in Hawai'i is reacting to these pressures by increasing rates, offering lower coverage limits with less desirable terms, increasing deductibles, declining to write new business or even non-renewing existing policies. Most condos are seeing renewal premiums increase by 150% to 800% compared to expiring, with most averaging around 400% to 500%. Insurers are looking at location, construction type, loss history, and information about building updates and repairs when making these decisions. Additionally, insurance companies are requiring large increases in the estimated replacement cost of buildings due to increased costs for construction materials and labor since 2020.
Limited Options in Hawai'i
Currently, Hawai'i has only three major standard market insurers for condos. These three companies insure most of the fire-resistive highrise buildings across the islands. Additionally, there are three major insurers covering the majority of the wood frame and joisted masonry associations throughout Hawai'i. Most of these companies did not write new business in 2024, and few insurers are willing to offer more than $10 million of coverage for each association. Condos are seeing layered insurance renewals involving more than five companies, with some complexes needing more than 15 companies to secure full coverage.
"The Changing Landscape of Property Insurance in Hawai'i" was republished
with permission from Surita Savio in the February 2025, Real Estate Commission Bulletin.
If you are a current Homeowner, you are well aware of these new(er) realities. If you are a Buyer or are considering purchasing in the future, particularly a Condo and especially in Hawai'i, it is important to know this information which is always building specific and could have resulted in hefty special assessments etc.
Make sure to connect with Jenn and her Pederson Properties Team directly to ensure you're aware + protected.
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