Hawaii Property Insurance Association proposes condo commercial product, seeks $20–50M in start‑up capital; board and administrators outline risks

The Hawaii Property Insurance Association (HPIA) told the joint House–Senate committee on April 3 that it can expand to offer a commercial property product for condominium associations — with coverage that would attach above $10,000,000 of total insured value (TIV) — but that doing so requires additional capital, upgraded systems and continued access to reinsurance.

HPIA plan administrator Terry Fabry and board chair Matthew Chung said HPIA has grown policy counts since the Maui fires and currently has about 2,200 policies in force with nearly $1 billion of exposure (total insured value). HPIA’s available surplus was reported around $30,000,000; presenters said the association has sought multiple rate increases to keep pace with rising reinsurance costs and has repeatedly drawn on investment reserves to cover net operating losses in recent years.

To support a condo‑focused commercial product that would supply supplemental limits above $10,000,000, HPIA said it would need an initial capital infusion in the $20,000,000 to $50,000,000 range. The administrators described a plan to leverage reinsurance (treaty, facultative or excess‑of‑loss arrangements) and to use a modernized policy administration system — an IT upgrade the board authorized in 2024 — to improve operational efficiency and agent access. HPIA’s current plan administrator is Marsh under a contract that runs through June 30, 2027; HPIA owns the planned new system and said the upgrade will preserve historical data and reduce administrative costs over time.

HPIA and committee members discussed program design and pricing. HPIA said the commercial product would not compete with private carriers for the best risks: the association expects to write higher‑cost, harder‑to‑place risks and to price premiums to be lower than current surplus‑lines quotes but higher than private market rates for best risks. HPIA representatives said they would seek to design underwriting to limit adverse selection and to diversify exposure (for example, writing both lava‑zone homeowners and non‑lava property) in order to reduce overall portfolio volatility.

Several legislators raised concerns about fairness and targeting. Senators and representatives asked how HPIA and the HHRF would avoid using public monies to subsidize coverage for very high‑value, luxury condominiums, and how they would ensure that limited governmental support reaches lower‑income residents in need. HPIA said it has an inventory of associations with physical characteristics (construction type, age and location) but does not have resident demographic data; it offered to run scenarios showing which associations would be eligible at alternative per‑location caps (for example, $40 million vs. $350 million) as a less operationally burdensome way to show distributional effects.

HPIA also explained its approach to lava‑zone risk. The presenters said there is no widely accepted, forward‑looking lava‑flow model comparable to hurricane or wildfire models; HPIA therefore prices lava risk using historical experience and established actuarial methods. Presenters emphasized that reinsurance costs for HPIA have exceeded 100% of direct written premium in recent years and that the association has drawn on investment reserves to remain solvent following the 2018 Kilauea lava flow.

What the committee asked for next: HPIA agreed to provide follow‑up analyses showing how alternate per‑location caps and capital levels would change the profile of eligible associations, and legislators said they would circulate written follow‑up questions to both HPIA and HHRF with a requested turnaround. The committees also asked HPIA to provide additional detail on the capital need, timing and how any loan structure (for example, an HHRF loan to HPIA) would affect premium costs.