Hawaiian Insurance & Guaranty Co.'s more than 22,000 customers may have to pay more for their hurricane coverage after a new owner takes over the company, state Insurance Commissioner J.P. Schmidt said.

Great Northwest Insurance Co., a home and automobile insurer from St. Paul, Minn., is expected to complete its purchase of Hawaiian Insurance by Sept. 20 after agreeing to the transaction on Friday.

Great Northwest President and Chief Executive Officer Stephen Doucette said it wouldn't be appropriate to comment until the acquisition of Hawai'i's No. 4 hurricane insurer is complete.

"However, Great Northwest's interest in Hawai'i's marketplace is long-term, and our plans for HIG would be for the company to remain a substantial insurer in Hawai'i," Doucette said in an e-mailed statement.

Schmidt said it was likely premiums would go up with the new owners because HIG's hurricane insurance rates were below what most others in the market charged. He said the low premiums were a reason why HIG was able to hold on to so many customers as the state put the insurer into rehabilitation and then liquidation over the past 10 weeks.

HIG hasn't raised hurricane rates in at least six years, said HIG President Ernest Fukeda Jr. Fukeda joined HIG in 2000. He said he will leave HIG at the end of the month to become chief operating officer of Honolulu-based HEMIC, a workers' compensation insurer.

"However, due to many of the catastrophies globally, this year would have been the year that we would have filed" for a rate increase, Fukeda said. "With the new owners coming in, I'm sure they will take the appropriate rate actions to make it price adequate."

Other insurers serving Hawai'i have been raising or filing for higher hurricane rates this year. State Farm Insurance Co. raised homeowners and hurricane rates by 18.1 percent, while Zephyr Insurance Co. filed for a 10 percent average increase in its hurricane coverage. United States Auto Association sought a 25 percent increase on average.

Great Northwest was founded in 1992 and is licensed to do business in 19 states, according to its Web site. The company tries to operate less expensively than others by having a decentralized structure that relies on independent agents for customer service. It has a B+ financial strength rating from A.M. Best Co.

The state took HIG into rehabilitation at the end of June as the insurer's Alabama-based parent company, Vesta Insurance Group, went into a financial spiral. Its A.M. Best rating dropped to C++. Anything below a B rating is considered vulnerable. Last month Vesta filed to liquidate HIG, a step that it said was needed as it tried to find a buyer for the company or, if needed, dissolve the insurer.

James Garvin, part of a Mainland group that tried to buy HIG, claimed Schmidt and his office had bungled the sales process and took too long to close a deal.

Garvin said Schmidt didn't advertise that HIG was up for sale and that Schmidt should have had a deal in hand before he took HIG into liquidation. He said Schmidt had not given serious consideration to his group's offer.

As it was, legal objections raised by Vesta in the liquidation scuttled a deal with a Michigan-based insurer. It forced Schmidt on Sept. 1 to redouble sales efforts as a Sept. 20 deadline loomed for closing down HIG.

"It was a debacle from Day 1," Garvin said, noting HIG lost policyholders and executives as weeks went by. "This is not that hard. They made it hard."

Schmidt defended his office's work, saying insurance regulators in Florida and Texas weren't successful in finding buyers for Vesta subsidiaries in those states and were forced to close the units down.

He said there wasn't time to market HIG and that he was forced to take the company into liquidation sooner than he wanted to cut off liabilities and claims in California, where the insurer had some automobile and homeowners policies.

"The critics are taking an enormously simplified view of what occurred here," Schmidt said, explaining that he passed on Garvin's bid because it was the lowest of the ones that were submitted.

Vesta's objections include not receiving enough notice of a hearing on HIG's liquidation. Schmidt said three of the company's five directors were informed, including its chairman.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.