Many Hawai'i homeowners are facing big increases in their hurricane insurance premiums because of rising costs for construction and other expenses.

State Farm Insurance Co., the largest Hawai'i hurricane insurer, will raise rates an average of 39.7 percent in its first increase in three years. No. 2 Zephyr Insurance Co. recently filed for a 10 percent average increase, according to state Insurance Commissioner J.P. Schmidt. He said that follows on Zephyr's 20 percent hike last year.

"It's not like it used to be," said Ronald Tobara, a sales agent for Royal Insurance Agency in Honolulu, talking about homeowner difficulties in getting insurance and jumps in premiums. "Rates are definitely higher. Hurricane (coverage) is definitely not cheap."

Hurricane insurance rates are climbing nationally, especially in Atlantic and Gulf states hit hard by Hurricane Katrina and other storms in the past two years. Last year was the most expensive on record for catastrophes, with losses totaling $61.2 billion, according to the Insurance Information Institute.

Locally, insurers are charging more because a rise in the price of building materials and labor means it would cost more to fix damaged residences, Schmidt said. Insurers are also getting hit by higher rates from reinsurers, or companies that provide insurance for insurance companies. The insurance institute reported reinsurer rate hikes for catastrophic coverage can range from 30 percent to 150 percent depending on the location.

"I do have to recognize the cost of their reinsurance is going up," Schmidt said. "It's likely that hurricane insurance rates will be going up."

Insurers and reinsurers are also tweaking computer models with more data so they aren't caught off-guard the way they were with Katrina, which produced $40.6 billion of insured losses. This is especially the case for State Farm, which doesn't rely as much as other companies on reinsurance.

RAISING PREMIUMS

Locally, Zephyr and other insurers have limited coverage of older homes with single-wall construction, while other companies are raising premiums to help meet new financial reserve requirements set by rating agency A.M. Best Co.

State Farm is taking some of the sting out of the hurricane insurance increase for people because its homeowners coverage, sold in tandem with hurricane policies, will have a 5.1 percent average decline.

Carolyn Fujioka, company spokeswoman, said homeowners with both policies will see only an average total increase of 18.1 percent. The rates go into effect on Sept. 15 for new polices and Nov. 1 for existing policies being renewed.

United Services Auto Association, Hawai'i's No. 4 homeowners and hurricane insurer, has filed to boost its hurricane rates by 25 percent on average. When coupled with a decline in homeowner's rates, the increase would be 15 percent on average, Schmidt said.

Lynette Lo Tom, spokeswoman for Zephyr, said the company didn't wish to comment on the reasons for its rate increase.

Royal Insurance agent Tobara said the costs of the insurance are such that some homeowners on fixed incomes are choosing to do without hurricane coverage.

"Which of course is not what we would advise," Tobara said. "But they're playing the odds."

The last hurricane to strike Hawai'i was 14 years ago when Iniki blew across Kaua'i.

Schmidt recommended that people speak with a financial adviser to see if there are ways to pay for hurricane coverage by taking out a home equity loan or other means.

SINGLE-WALL WOES

Earlier this year some home buyers had problems getting new hurricane policies for single-wall homes. Some mortgage lenders also wouldn't allow borrowers to maintain coverage with Hawaiian Insurance & Guaranty because of financial problems suffered by its parent company.

Schmidt said the availability of hurricane insurance remains a concern, though companies new to the market, Dongbu Insurance Co., ICAT Specialty Insurance Co. and the American Automobile Association started offering policies in recent months.

"The fact that we have three new carriers providing coverage is very good and gives me a little bit of comfort," Schmidt said. "But I'm always concerned about it because it's a very difficult area."

Tobara said Hawai'i residents are more fortunate than those in Alabama, Mississippi, Texas and Louisiana, where coverage has become much more difficult to get and rates have jumped even higher.

"Fortunately, this is not a Gulf state," Tobara said. "But we have our set of problems here."

Reach Greg Wiles at gwiles@honoluluadvertiser.com.