By Rick Daysog
Advertiser Staff Writer
Hawai'i homeowners could see a slight increase in their hurricane insurance premiums as a result of Hurricane Katrina, according to state Insurance Commissioner J.P. Schmidt.
Schmidt said his office won't allow Mainland insurers to raise rates in Hawai'i to cover their losses from Katrina, which could exceed Hurricane Andrew in 1992 as the nation's costliest storm.
But insurers will be able to pass on some of their added costs from higher reinsurance rates, which are expected to soar as a result of Katrina
"I anticipate there will be an indirect but minor impact on price and availability," Schmidt said.
Reinsurance is a form of back-up insurance for insurance companies that helps them cover their losses from large catastrophes such as Katrina and Andrew.
Often times, when a disaster like Katrina hits, reinsurance rates soar, prompting insurance carriers to raise their rates or stop offering new policies.
Schmidt said it's too early to estimate how much premiums could rise since the damage estimates and claims from Katrina haven't been tallied yet.
Schmidt cited the case of 1992's Hurricane 'Iniki on Kaua'i, which caused $2.6 billion in damage, and Hurricane Andrew, which devastated economies of Florida and other Gulf Coast regions.
The heavy losses from 'Iniki and Andrew led some reinsurance companies to raise their rates by 200 percent to 500 percent, and prompted insurers such as Hawaiian Insurance and Guaranty Co. to leave the market.
"It's way too soon to quantify Katrina's impact but there can be a direct affect on availability and price," said Steve Tabussi, vice president of customer solutions at First Insurance Co. of Hawaii, one of the state's largest providers of hurricane insurance.
The potential rate increases come after the state's largest hurricane insurer, Zephyr Insurance, increased premiums by an average of 20 percent last year. Zephyr's rate increase was in response to its losses from four separate hurricanes that slammed into Florida last year.
The four hurricanes cost insurers nearly $23 billion.
AIR Worldwide Corp., a risk modeling firm based in Boston, told The Associated Press yesterday that insured losses from Katrina could range from $12 billion to $26 billion. At the high end, that would make Katrina more expensive than the previous record-setting storm, Hurricane Andrew, which caused $21 billion in insured losses in 1992 to property in Florida and along the Gulf Coast.
Another risk modeling firm, Eqecat Inc., which is based in Oakland, Calif., initially estimated damages from Katrina at up to $30 billion. But it lowered its projections to $9 billion to $16 billion after the storm struck east of populous New Orleans.
"What we're looking at is one of the top two or three most expensive storms in U.S. history," said Robert Hartwig, chief economist with the Insurance Information Institute, a New York-based research center supported by property and casualty insurers.The Associated Press contributed to this report.
Reach Rick Daysog at firstname.lastname@example.org.