Senate panel revises lava insurance aid bill to study

Summary

A Hawaii Senate committee replaced a lava zone insurance subsidy bill with a study of its costs and effects.

Why this matters

The bill could affect whether homeowners in Puna and Kau receive state help with rising insurance costs in high-risk lava zones. The committee’s changes delay any direct aid while lawmakers study the proposal’s fiscal and policy effects.

A Hawaii Senate committee voted unanimously March 24 to rewrite House Bill 20, replacing a proposal to subsidize property insurance in high-risk lava zones with a study by the Legislative Reference Bureau.

The Senate Committee on Commerce and Consumer Protection removed the bill’s main provisions and instead directed the nonpartisan bureau to examine the proposal’s practicality and implications. The committee also recommended adding language to cover the cost of the study.

As introduced by state Rep. Greggor Ilagan of Puna, the bill would have created a lava zone insurance fund to help pay property insurance premiums for homeowners in lava zones 1 and 2 on Hawaii island. Ilagan said the measure was intended as a temporary step to help residents facing steep premium increases after the 2018 Kilauea eruption. The House passed the bill in early March, and it was sent to the Senate on March 6.

After the committee vote, Ilagan said he was surprised by the changes.

“I did not see this coming,” he told the Hawaii Tribune-Herald. “I thought there was only going to be two options: passing it out or killing it. I didn’t think there was a third option. But it definitely changes the bill into a study, unfortunately.”

He said he would support the revised measure to keep it moving and said some original provisions could be restored later.

Hawaii has previously created insurance assistance for lava-affected areas. In 1991, the Hawaii Property Insurance Association was established as an insurer of last resort for homeowners who could not get coverage from private companies after the 1990 Kaimu lava flow.

State Insurance Commissioner Scott Saiki submitted testimony opposing the subsidy proposal. He wrote that while the state recognizes affordability problems in volcanic hazard areas, the bill raised “significant regulatory, fiscal, and market concerns.”

“Subsidies mask the true cost of risk, (and) may encourage development and continued habitation in areas with the highest expected loss exposure, and create long-term dependence on state support rather than market-based solutions,” Saiki wrote.

Most testimony supported the fund, including from homeowners in lava zones 1 and 2 who said premiums had become difficult to afford.

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