7.2 Hawaii Property Insurance Association (HPIA), the Hurricane Relief Fund & Catastrophe Claims

7.2 Hawaii Property Insurance Association (HPIA), the Hurricane Relief Fund & Catastrophe Claims

Hawaii's catastrophe exposures — active volcanoes on Hawaiʻi Island, Central Pacific hurricanes, tsunamis, and wildfire — have produced two state-created markets of last resort. The adjuster outline lists the Hawaii Property Insurance Association (HPIA) (HRS chapter 431, article 21). Hawaii's producer outline also lists the Hawaii Hurricane Relief Fund (HHRF) (HRS chapter 431P), which adjusters should recognize.

Why HPIA Exists

The ongoing Kīlauea eruption that began in 1983 destroyed homes in the Puna district, and private insurers stopped writing or renewing homeowners coverage in the highest-hazard areas. In 1991, the legislature created HPIA (Act 284 of 1991) to:

1. assure stability in the property insurance market for property located in Hawaii;
2. assure the availability of basic property insurance; and
3. provide for the equitable distribution among member insurers of the responsibility for insuring qualified property that cannot obtain basic property insurance from authorized insurers (§ 431:21-101).

HPIA issued its first policy in March 1992 with a $125,000 dwelling limit. After Hurricane Iniki struck Kauaʻi on September 11, 1992, HPIA expanded basic property coverage to the rest of the state.

Structure and Membership

• Membership — every insurer authorized to write property or casualty insurance in Hawaii, other than an insurer writing only motor vehicle insurance under § 431:10C-106, must remain a member as a condition of its authority to do business (§§ 431:21-102, 21-103).
• Sharing results — each member participates in HPIA's writings, expenses, profits and losses in proportion to its net direct written premiums for the preceding year (§ 431:21-103(b)).
• Board — 12 directors: eight selected by member insurers, one appointed by the commissioner to represent producers, and three appointed by the commissioner to represent the public (§ 431:21-104).
• Plan of operation — approved by the commissioner. It sets maximum limits, underwriting standards comparable to those outside designated areas, deductibles, producer commissions, rates, and inspection procedures (§ 431:21-106). HPIA files rates like an insurer. Its published materials state that rates may not include a profit component.
• No public funding — HPIA is not a state agency and receives no taxpayer money. If approved by the commissioner, it may assess members for extraordinary losses, up to 2% of a member's net direct written premiums per year, with 30 days' notice (§ 431:21-105(b)(6)). Members may credit an approved assessment against premium tax at 20% a year for five years (§ 431:21-115).
• Operations — HPIA has no employees. A plan administrator issues and services policies and handles claims on HPIA's behalf.

Eligibility

HPIA's published rules add that residential coverage is available to eligible owners anywhere in the state or as designated by the commissioner. Applicants must first try the voluntary market and may apply after receiving at least two declinations from licensed insurers.

The 2025 legislation that added condominium and market-failure eligibility is temporary, with a five-year limit, and responds to the post-2023 condominium insurance crisis.

The USGS Lava Flow Hazard Zones

The USGS divides Hawaiʻi Island into nine lava flow hazard zones. Zone 1 includes the summits and rift zones of Kīlauea and Mauna Loa, where vents have repeatedly erupted. Zone 2 lies adjacent to and downslope of zone 1 and includes much of Puna (for example, Leilani Estates and Kalapana) and parts of Kaʻū. The 2018 lower East Rift Zone eruption destroyed more than 700 homes in Puna, which showed why voluntary insurers avoid these zones.

Coverage and Policy Terms

• Basic property insurance means insurance against direct loss to real or tangible personal property from the perils of the standard fire policy and extended coverage endorsement (§ 431:21-102). All qualifying properties are eligible for that coverage, and additional coverages are offered when the commissioner directs or approves (§ 431:21-109(a)).
• HPIA's published materials list four policies: Dwelling, Homeowners, Renter's, and Unit-owner's. Limits range from $50,000 to $450,000, with deductible options of $500, $1,000, $2,000 or $3,000. Policies generally provide less coverage at a higher price than the voluntary market. HPIA program guidelines have required applicants to sign an acknowledgment that hurricane and flood coverage is excluded.
• Mortgage coverage — at a mortgagor's written request, HPIA must provide coverage at least equal to the mortgage obligation, but not more than the property's value or the plan's limits, naming the mortgagee for the outstanding balance. The amount must comply with the over-insurance rules in article 10E (§ 431:21-109(b), (c); see 7.1).
• Lender acceptance — financial institutions must treat an HPIA policy the same as a similar policy from an authorized insurer (§ 431:21-118).

Applying for Coverage

The Hawaii Hurricane Relief Fund (HRS Chapter 431P)

• Created in 1993, after Hurricane Iniki caused billions of dollars in losses and private insurers withdrew hurricane capacity.
• It wrote hurricane-only policies to supplement property policies that excluded hurricane.
• When private hurricane coverage returned, the fund stopped writing policies effective December 1, 2000, and remained dormant.
• In 2025, the legislature reactivated the fund and gave it authority to provide hurricane coverage for condominiums, alongside HPIA's expanded property authority.

Adjusting Catastrophe Claims in Hawaii

Lava and Volcanic Losses

Hurricane Losses

• Many Hawaii property policies use percentage hurricane deductibles (for example, 2% of the Coverage A limit). The trigger and duration — often a hurricane watch or warning issued by the Central Pacific Hurricane Center, lasting until a set period after it ends — are defined by the policy endorsement, so the adjuster applies the endorsement's own wording.
• Example: Coverage A is $500,000 with a 2% hurricane deductible, and the covered wind damage is $35,000. The deductible is $10,000, so the policy pays $25,000.
• Wind versus water: storm surge and flooding are excluded and belong to the NFIP or private flood policy (2.7). The adjuster documents wind and water damage separately.
• After major events, the commissioner may authorize registered nonresident independent adjusters (5.3).