Posted on: Friday, December 24, 2004

Hurricanes hike insurance rates

By Deborah Adamson
Advertiser Staff Writer

Zephyr Insurance has raised its hurricane insurance premiums by an average of 20 percent, as the four recent Florida hurricanes partly drove the industry's risk assessments higher.

Homeowners on average are seeing an increase of $7.50 a month or $90 a year. It's the first time that Zephyr, the state's largest hurricane insurer, has raised its premium since the company was founded in 2000. The rate increase took effect Nov. 1 and covers 65,000 policies.

Every year, the industry generates hurricane risk models to assess its likely losses in a market. The models are based on the global environment as well as local areas, said Zephyr spokeswoman Sherrie Coronas.

As such, record claims from this year's four hurricanes in Florida can affect premiums for Hawai'i homeowners.

Christie Adams of Hawai'i Kai saw her hurricane insurance jump 30 percent — to $434 a year from $333.

"Why are they raising rates?" she said. "We are not in a zone known for hurricanes. Why should we be taking the hit for (Florida)?"

The past two hurricanes to hit the state were Iniki in 1992 and Iwa in 1982.

Adams is planning to contact the insurer and see if they can reduce the premium.

Homeowners could get a rate decrease by reinforcing their dwellings — such as installing hurricane clips and applying window protections. A homeowner's premium is affected by factors such as the quality of construction and the home's replacement cost.

The hurricane risk models also determine the level of revenue needed to sustain the insurer.

"The rate changes (will) help ensure that we are prepared to meet obligations to policyholders in the event of a catastrophe," said Zephyr President Richard Toyama, in a statement. "The rate change also helps to strengthen the company and ensure its continued presence in the Hawai'i marketplace where hurricane insurance coverage was once difficult to find and afford."

Other insurers who were approved higher rates this year include State Farm, AIG, Liberty Mutual, American Reliable Insurance and AMEX Assurance, according to the state Insurance Division.

Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.