The possibility that Hawaiian Insurance & Guaranty may be shut down and its policies canceled loomed yesterday as the state redoubled its effort to find a buyer for the No. 4 seller of hurricane insurance here after weeks of talks with potential owners.

State Insurance Commissioner J.P. Schmidt said he will be talking with possible buyers this weekend to see if roadblocks to a deal can be removed. The state is trying to avoid a closure of Hawaiian Insurance & Guaranty after taking it over from its financially strapped parent company two months ago.

"We are doing everything we possibly can to try to finalize a purchase of HIG because we believe that will be in the best interest of everyone," Schmidt said yesterday. "Because of legal issues that arose it doesn't look like we'll have it today."

The state had hoped to have a deal to present yesterday to Circuit Court Judge Karen Ahn, who is overseeing the state's liquidation of HIG. The state had been optimistic that it could get a buyer for HIG when it took the company into liquidation and had had serious discussions with a potential buyer until the two couldn't reach an agreement over some legal issues. Schmidt, who declined to discuss the issues, said the state is now talking with several interested parties.

HIG has about 23,000 hurricane insurance policies locally, the company said yesterday. The insurer's problems stem from financial woes suffered by its former parent firm, Vesta Insurance Co., which was hit by hurricane-related losses along the Gulf Coast and Florida in recent years.

In late June the state began overseeing HIG's operations and last month filed for liquidation as a step toward a sale or dissolution of the company. A shutdown of HIG would toss thousands of policy holders out into Hawai'i's already tight hurricane insurance market, where coverage costs are increasing and insurers are limiting policies on certain types of homes.

Schmidt said representatives for the state and potential buyers will be working to overcome differences over the weekend in the hopes of having a better idea about HIG's future early next week. The current liquidation order calls for the cancellation of policies on Sept. 20, Schmidt said.

"We're really walking a tightrope over tigers and snakes, so to speak," he said.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.