Talk of Hawaii state-captive gains momentum

Discussions around the possibility of Hawaii creating some form of state-sponsored-captive or an insurance pool designed to help manage potential soaring insurance costs in the aftermath volcanic eruptions and wildfires seem to be gaining momentum.

In another TV interview, Gov. Josh Green discussed his fears that losses from the impact of natural disasters could make insurers wary of doing business in the state – forcing up insurance premiums. He also mooted the idea last month.

His solution could be to form a state-backed captive insurance programme, leveraging the state’s existing insurance laws which facilitate the formation of captives, funded by a proposed environmental “green fee” that would charge visitors for coming to Hawaii.

Little detail is available on exactly how such a scheme would work. It seems likely that the solution would end up looking more like a state-based fund responsible for both managing/mitigating risk and complementing the private sector, such as the Florida Hurricane Catastrophe Fund or the California Earthquake Authority.

Since August, the state has had a big focus on recovery efforts on Maui after a wildfire killed at least 100 people and destroyed Lahaina. Green has announced a $150 million recovery fund for the families of fire victims funded by the state, Kamehameha Schools, Hawaiian Electric Co. and Maui County.

While there seems to be broad support around the idea of a state-backed insurance scheme of sorts, commentators have also pointed out that such schemes can take years to establish, and the pure captive model is more suited to the needs of specific private companies.