WHETHER IT'S A NATURAL DISASTER A FIRE OR A FLOOD, HOME INSURANCE IS A FINANCIAL SAFETY NET FOR LARGE LOSSES THAT MOST PEOPLE COULD NOT AFFORD ON THEI.

IT'S ESSENTIAL TO HAVE BECAUSE YOU NEVER KNOW WHEN YOU'LL NEED.

BUT HAWAI'I RESIDENTS ARE FEELING THE PAIN IN THEIR WALLETS AS HOME INSURANCE PREMIUMS SKYROCKET.

WE'RE ASKING STATE LAWMAKERS WHAT THEY'RE DOING TO ADDRESS HAWAI'I'S HOME INSURANCE CRISIS.

TONIGHT'S LIVE BROADCAST AND LIVESTREAM OF "INSIGHTS" ON PBS HAWAI'I START NOW.

♪ ♪ >> Daryl: ALOHA AND WELCOME TO "INSIGHTS" ON PBS HAWAI'I.

I'M DARYL HUFF.

AS IF THE PRICE OF PARADISE WASN'T HIGH ENOUGH, MANY OF US, ESPECIALLY CONDOMINIUM OWNERS, ARE NOW FACING DRAMATICALLY HIGHER HOME INSURANCE RATES.

NATIONWIDE NATURAL DISASTERS AN THE POSSIBILITY OF MORE FUELED BY CLIMATE CHANGE IS RESHAPING THE BUSINESS, LEADING TO SOARIN PREMIUMS, POLICY CANCELLATIONS AND LIMITED COVERAGE OPTIONS.

THE CRISIS IS NOT LIMITED TO HA.

BUT WITH OUR HOUSING MARKET ALREADY UNAFFORDABLE STATE LEADERS ARE SCRAMBLING FOR POSSIBLE SOLUTIONS.

WE LOOK FORWARD TO YOUR PARTICIPATION IN TONIGHT'S SHOW.

YOU CAN EMAIL OR CALL IN YOUR Q.

AND YOU'LL FIND A LIVESTREAM OF THIS PROGRAM AT PBSHawaii.org AND THE PBS HAWAI'I YOUTUBE PAG.

NOW, TO OUR GUESTS.

REPRESENTATIVE SCOT MATAYOSHI REPRESENTS DISTRICT 49, COVERIN KANEOHE AND MAUNAWILI AND IS TH CHAIR OF THE COMMITTEE ON CONSUMER PROTECTION AND COMMERC.

HE'S A FORMER PUBLIC SCHOOL TEACHER WITH A LAW DEGREE FROM THE UNIVERSITY OF HAWAI'I.

JERRY BUMP IS THE STATE'S ACTIN INSURANCE COMMISSIONER FOR THE DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS INSURANCE DIVI.

HE'S WORKED IN VARIOUS CAPACITIES IN THE INSURANCE INDUSTRY FOR MORE THAN THREE DE.

ALEX MCLAURY IS AN INSURANCE AGENT WITH THE ACW GROUP IN HON.

ORIGINALLY FROM SOUTH DAKOTA, HE'S A GRADUATE OF THE UNIVERSITY OF HAWAI'I AT MANOA.

LAST JUNE, HE WAS APPOINTED TO SERVE ON GOVERNOR GREEN'S INSURANCE TASK FORCE.

AND GREG MISAKIAN IS A MEMBER O THE WAIKIKI NEIGHBORHOOD BOARD AND HAS SERVED ON HIS CONDOMINIUM ASSOCIATION BOARD A DIRECTOR AND TREASURER.

HE'S ALSO THE FIRST VICE PRESIDENT ON THE BOARD OF DIRECTORS FOR THE KOKUA COUNCIL A NONPROFIT FOCUSING ON ELDER A.

LET ME START WITH YOU, GREG, AS A CONDO OWNER, TELL ME A LITTLE BIT ABOUT YOUR EXPERIENCE, A BOARD MEMBER, WHEN YOUR GUYS' INSURANCE CAME UP?

>> SO I PURCHASED MY CONDOMINIUM IN 2019.

WHEN I PURCHASED MY PROPERTY, THE CONDO INSURANCE FOR THE ENTIRE PROPERTY WAS THE MASTER POLICY FOR THE CONDOMINIUM ASSOCIATION WAS ABOUT $118,000.

WE'RE CURRENTLY AT $750,000 AND PROGRESSIVELY, WHAT WAS HAPPENING OVER A COUPLE OF YEARS EARLY ON, WE HAD SOME WATER LEAKS, WE HAD WASTE PIPE DAMAGE, THE CRACKS -- THESE WASTE PIPES ARE -- THEY'RE ESTABLISHED AS BEING DEFECTIVE BECAUSE THEY'RE EARLY LIFE FAILURES SO WE HAVE CAST IRON PIPES THROUGHOUT HAWAI'I.

WHAT IS HAPPENING IS THEY'RE SUPPOSED TO BE SURVIVING FOR ABOUT 100 YEARS.

UNFORTUNATELY, THEY'RE ONLY LASTING FOR MAYBE 50 YEARS OR LESS.

>> Daryl: IS THAT THE PRIMARY DRIVER OF WHY YOUR INSURANCE IS SO HIGH?

>> IT STARTED TO GO UP.

WE WENT TO 18 AND THEN IT DOUBLED AND IT DOUBLED AGAIN YEAR ON YEAR.

ONLY IN THE LAST COUPLE OF YEARS HAS IT REALLY, UM, YOU KNOW, IT'S ACTUALLY STABILIZED, SO IT WENT UP SEVERELY WHEN WE HAD THE WATER LEAKS AND CONTINUING WA WATER.

>> Daryl: SO WHAT DOES THAT DO TO YOUR MAINTENANCE -- HOW BIG OF A COMPONENT IS IT TO YOUR MAINTENANCE FEE?

>> WHEN I PURCHASED ORIGINALLY, MY MAINTENANCE FEE WAS $570 IN 2019.

I CURRENTLY MAY $1150 AND WE HAVE NO AMENITIES IN MY CONDOMINIUM ASSOCIATION.

>> Daryl: I'M HEARING THAT'S NOT BAD IS WHAT I'M HEARING.

ALEX McLAURY, YOU'RE THE MIDDLE MAN BETWEEN THE AGENTS AND THESE CONDO COMPANIES.

WHAT'S GOING ON ACROSS THE MARKET?

>> TO YOUR POINT, THAT'S BEEN A BIG DRIVING FACTOR PRE-- THE EVENT COMING ON TWO YEARS NOW.

>> Daryl: YOU MEAN THE WILDFIRE?

>> YEAH!

EXACTLY!

THE DEFERRED MAINTENANCE HAS BEEN A LARGE DRIVING FACTOR IN A LOT OF INSURANCE -- ESPECIALLY HIGH RISE BUILDINGS SEEING THAT INCREASE YEAR OVER YEAR JUST BECAUSE OF THOSE WATER CLAIMS KIND OF TRICKLING UP.

>> Daryl: TRICKLING UP?

[CHUCKLES] LET ME UNDERSTAND, THOUGH, IF I'M IN A CONDO AND THE WATER SYSTEM IS BAD, WHY WOULD EVERYBODY HAVE TO PAY MORE FOR INSURANCE?

WHY WOULDN'T JUST INDIVIDUAL OWNERS BE RESPONSIBLE FOR THE DAMAGE THERE?

WHY IS THAT SOMETHING THAT HAS TO BE SHARED BY ALL THE OWNERS?

>> THE MASTER POLICY IS A COMMON ELEMENT COST, SO WHETHER IT BE SOMETHING THAT IS -- FOR EXAMPLE, LIKE EVERYONE IS A UNIT OWNER OF THAT ASSOCIATION, SO THEY HAVE RIGHT AND ENTITLEMENT TO THAT INSURANCE POLICY BUT THEN ALSO ON THE FLIP SIDE, IF THERE IS DAMAGE THAT COMES THROUGH, IT IS A COMMON EXPENSE THAT IS INCURRED.

SO IT'S, UM, IT'S KIND OF YOU LIVE IN A GROUP ENVIRONMENT, IT'S KIND OF SHARED WITHIN EVERYBODY, AND IT'S -- THE REALITY WITH LIVING IN A HIGH RISE CONDO OR TOWNHOME.

>> Daryl: LET ME ASK YOU, WHAT KIND OF NUMBERS ARE YOU HEARING WHEN PEOPLE COMPLAIN TO YOU ABOUT KIND OF INCREASES THAT THEY'VE BEEN SEEING?

>> UM, SO WE -- >> Daryl: TALKING ABOUT CONDOS SPECIFICALLY.

>> SO WE STARTED SEEING SIGNIFICANT UPTICK IN INFORMATION COMING TO US.

SO AT THE DIVISION, WE DON'T REALLY HEAR WHAT IS GOING ON IN THE MARKETS LIKE ALEX WOULD UNTIL IT'S ALREADY AT THAT CRISIS LEVEL, SO NEAR THE END OF 2023, WE ACTUALLY GOT CONTACTED FIRST BY BANKS TELLING US WE HAVE ALL OF THESE BUILDINGS THAT ARE UNDERINSURED OR DON'T HAVE ANY INSURANCE, AND IT WAS RESULT OF THE ESCALATING PRICES, BECAUSE THESE BUILDINGS ARE GETTING THEIR INSURANCE FROM COMPANIES THAT WE DON'T LICENSE, THE MAJORITY OF THEM ARE, BUT WHAT WE WERE HEARING WAS AT THE PEAK WHICH WAS ABOUT JUNE/JULY OF 2024 -- SO ABOUT NINE MONTHS AGO THAT WAS I THINK THE PEAK, AND MAYBE ALEX CAN CONFIRM THAT, BUT WE WERE HEARING ON AVERAGE ASSOCIATIONS WERE SEEING ANYWHERE FROM 300 TO 500% INCREASES IN JUST ONE YEAR!

SOME EXTREME EXAMPLES WE HEARD OF ONE COMPLEX THAT HAD A PREMIUM OF $380,000 THE YEAR BEFORE AND IT WENT TO $3.2 MILLION THE NEXT YEAR.

>> Daryl: OUCH!

>> OBVIOUSLY, THAT'S ON THE VERY EXTREME SIDE, BUT EVEN 300% IS VERY EXTREME.

>> Daryl: HOW DOES THIS BECOME A STATE ISSUE, SCOT MATAYOSHI?

>> IS THAT BECAUSE THEY'RE GOING FROM ADMITTED CARRIERS TO SURPLUS LINES?

IS THAT THE MAIN SURPLUS FOR THAT?

>> ALEX CAN CONFIRM BUT A LOT OF THE UTILITIES WERE UTILIZING SURPLUS LINES MARKET.

IT COMES DOWN TO THE RE-INSURANCE MARKET.

IT WAS GETTING SEVERELY IMPACTED BY NATURAL DISASTERS.

>> Daryl: SCOT, YOU HAVE TO EXPLAIN THIS TO YOUR CONSTITUENTS.

HOW DO YOU EXPLAIN THE RE-INSURANCE TO THE SURPLUS LINES INSURANCE?

YOU HEAR ALL OF THIS.

WHAT'S THE DIFFERENCE?

WHAT HAPPENS WHEN ALL OF A SUDDEN -- WHAT IS A SURPLUS LINE MEAN?

>> WELL, I MEAN, IF THE CONSTITUENTS GIVE ME 20 MINUTES OF THEIR TIME, I COULD EXPLAIN IT.

REALLY QUICKLY, I MEAN, YOU HAVE ADMITTED CARRIERS WHICH RATES ARE REGULATED BY THE DCCA.

>> Daryl: BY THE STATE?

>> BY THE STATE.

IF YOU CAN'T GET INSURANCE BY THE REGULATED INSURANCE INDUSTRY, YOU HAVE TO GO TO KIND OF THE WILD WEST OF SURPLUS LINES WHERE THERE ARE VERY FEW RULES, IF ANY, AND THEY CAN CHARGE YOU KIND OF WHATEVER THEY WANT, WHATEVER THE MARKET DICTATES.

I'M NOT SAYING THERE'S ONLY ONE SURPLUS LINE CARRIER AND THEY CAN CHARGE YOU WHATEVER THEY WANT, BUT THE RATES THERE TEND TO BE MUCH, MUCH HIGHER.

SO IT BECOMES A STATE'S PROBLEM BECAUSE WE CARE ABOUT OUR CONSTITUENTS.

WE CARE ABOUT OUR PEOPLE.

WE WANT PEOPLE TO HAVE AN AFFORDABLE INSURANCE RATE.

THE ONLY REAL WAY I SEE THAT HAPPENING IS TO BRING PEOPLE BACK FROM THOSE SURPLUS LINES CARRIERS BACK INTO THE ADMITTED MARKET.

THAT'S FAIRLY DIFFICULT WITH GIVEN THE CONDITION A LOT OF CONDO BUILDINGS ARE IN.

>> Daryl: WE'LL GET A LITTLE BIT MORE INTO THE NUTS AND BOLTS OF THAT IN A LITTLE BIT.

I WANT TO ASK GREG, THOUGH, HOW DID YOU GUYS -- YOU SAY IT STABILIZED?

YOU FINALLY FOUND AN AFFORDABLE -- "AFFORDABLE" PLAN?

HOW DID THAT GET PUT TOGETHER?

>> WE'RE LUCKY WE DIDN'T GET A HUGE INCREASE THIS PAST YEAR.

WE GOT A PRETTY SUBSTANTIAL INCREASE, THOUGH.

WE HAVE A LOT OF DEFERRED MAINTENANCE THAT IS NOT BEING ADDRESSED.

SO TO GIVE AN EXAMPLE OF WHERE YOU HAVE INSURANCE, WE HAVE THE INSURANCE BUT UNFORTUNATELY WE CAN'T USE THE INSURANCE.

SO WE HAVE A SITUATION WHERE WE HAVE AN OWNER WHO HAS DAMAGE TO THEIR PROPERTY FROM WATER INTRUSION FROM OUR ROOF.

THE ROOF HASN'T BEEN REPAIRED FOR MANY YEARS.

THERE WAS REPAIRS NEEDED THAT SHOULD HAVE BEEN DONE YEARS AGO.

UNFORTUNATELY, THEY'VE ALREADY UTILIZED THEIR INSURANCE TO REPAIR IT ONCE.

AND NOW WE'RE REPAIRING IT THE SECOND TIME, BUT BECAUSE OUR DEDUCTIBLE IS $50,000 AND THE WORK IS ABOUT $60,000, WE'RE NOT GOING TO FILE A CLAIM.

WE'RE NOT GOING TO BE ABLE TO USE OUR INSURANCE.

>> Daryl: YOUR MEMBERS -- >> IT GOES RIGHT TO US, YEAH.

IT GOES RIGHT TO OUR POCKETS.

>> Daryl: ALEX McLAURY, EXPLAIN TO ME THE RELATIONSHIP BETWEEN DEFERRED MAINTENANCE AND IF A CONDO HAS -- HOW DO YOU KNOW -- HOW DOES AN INSURANCE COMPANY KNOW WHAT THE RISK IS FROM DEFERRED MAINTENANCE?

DO THEY COME IN THERE AND INSPECT?

HOW DO THEY KNOW?

>> TYPICALLY, IT'S -- IT'S -- YOU CAN SEE IT'S PRETTY EVIDENT ON THE LOSS RATIO OR THE CLAIMS HISTORY.

ANYTIME AN INSURANCE CARRIER WILL UNDERWRITE A BUILDING, THEY'LL LOOK AT THE LOSS RUNS.

THOSE WILL SHOW -- >> >> Daryl: WHAT'S THE LOSS RUN?

>> THE CLAIMS HISTORY OF YOUR BUILDING.

IT'S THE TRACK RECORD OVER THE LAST FIVE YEARS.

>> Daryl: THE MORE YOU USE YOUR INSURANCE, THE MORE LIKELY YOU'LL LOSE YOUR INSURANCE?

>> BASICALLY.

IT STARTS TO SHOW A LIST OF THE NUMBER OF CLAIMS YOU HAD.

IF IT'S SOMETHING WHERE IT'S WATER CLAIMS, A BUILDING COULD HAVE ONE, TWO, FIVE, 10 IN THAT COURSE OF THAT POLICY PERIOD, AND AS LONG AS IT'S IN THAT POLICY PERIOD BY CONTRACT, THEY PAY IT OUT, BUT RENEWALS IS WHERE THEY START TO GET HIT WITH THE NONRENEWABLES.

>> Daryl: JERRY, FROM THE -- STATE GOVERNMENT HAS LOTS OF -- I'M NOT ACCUSING YOU OF THIS -- BUT SILOS.

BY THE TIME AN INSURANCE CLAIM HAS GOTTEN OUT OF HAND, THE DEFERRED MAINTENANCE THING HAPPENED A WHILE AGO.

YOU'RE NOT RESPONSIBLE FOR MAKING SURE CONDOS GET THEIR MAINTENANCE, RIGHT?

>> CORRECT.

>> Daryl: WHAT'S THE STATE'S ROLE IN THIS BALANCE BETWEEN MAINTAINING A BUILDING AND THE ABILITY TO GET INSURANCE?

>> SO WITHIN DCCA, THERE IS WHAT WE CALL A REAL ESTATE BRANCH.

THEY ARE RESPONSIBLE FOR ENFORCING THE REGULATIONS THAT ARE UNDER THEIR PURVIEW AS IT RELATES TO CONDOMINIUMS.

THERE'S CERTAIN THINGS THAT HAS TO BE FILED WITH THEM, BUT IN REALITY, THEY DON'T REALLY HAVE A LOT OF ENFORCEMENT ABILITY.

SOME OF THAT COMES BACK TO, YOU KNOW, A POLICY DECISION, HOW MUCH DO YOU WANT THE STATE TO REGULATE CONDOS AND THE CONDO BOARDS AND THE CONDO MANAGEMENT COMPANIES IN MAKING SURE THAT THEY KEEP UP?

TO BE HONEST, OUR STATE HAS OPERATED UNDER A MODEL OF SELF-GOVERNANCE THAT EACH BOARD OF EACH ASSOCIATION IS RESPONSIBLE FOR MAINTAINING THOSE PROPERTIES.

UNFORTUNATELY, INSURANCE IS SORT OF THE SYMPTOM OF A BIGGER PROBLEM LIKE GREG IS MENTIONING OF DEFERRED MAINTENANCE, RIGHT?

WHEN YOU DEFER YOUR MAINTENANCE AND YOU START TO EXPERIENCE A LOT OF LOSSES LIKE ALEX SAYS, THEN THE INSURER ALWAYS HAS A CHOICE, DO I WANT TO ISSUE COVERAGE TO THIS BUILDING?

IF THIS BUILDING IS EXPERIENCING LOSS AFTER LOSS AFTER LOSS, THEY'RE JUST NOT GOING TO WANT TO INSURE THAT BUILDING.

>> Daryl: WE'LL EXPLAIN TO OUR VIEWERS THAT A LOT OF PEOPLE HAVE THOUGHT IT'S THE WILD FIRES, SO WHEN YOU HEAR THIS CONVERSATION, SOMETIMES YOU GO, OH, THAT'S COMPLETELY DIFFERENT FROM WHAT I THOUGHT.

SCOT MATAYOSHI IN THE LEGISLATURE, I THINK I RECALL THERE BEING SOME DISCUSSION ABOUT HELPING CONDOS CATCH UP WITH THEIR MAINTENANCE SO THEY COULDN'T FIND AFFORDABLE INSURANCE.

IS THAT PART OF THE SOLUTIONS THAT IS BEING DISCUSSED?

>> THAT'S CERTAINLY ONE OF THEM.

I INTRODUCED A BILL TO DO JUST THAT, TO CREATE A LOAN PROGRAM FOR THOSE CONDOS THAT CAN'T GET A NORMAL COMMERCIAL LOAN BECAUSE THEY'RE SO UNDERWATER ALREADY.

GIVE THEM THAT LOAN.

ALLOW THEM TO DO THE DEFERRED MAINTENANCE.

IN FACT, JUST REALLY THE IMPORTANT DEFERRED MAINTENANCE THAT THEY NEED TO CATCH BACK UP SO THAT HOPEFULLY INSURANCE COMPANIES WILL LOOK AT THEM AS LESS OF A RISK.

I TALKED TO PRETTY MUCH EVERY INSURANCE COMPANY I COULD TALK TO BOTH HERE AND ON THE MAINLAND.

ALL THE BROKERS.

THE THING THAT KEPT COMING UP IS WATER LOSS.

REPIPING AND OLD PIPES THAT WERE BURSTING CREATING A CASCADING EFFECT -- LITERAL CASCADING EFFECT, WATER CASCADING EFFECT DAMAGING UNITS.

IT WAS THE LACK OF SPRINKLERS CREATING A FIRE RISK.

THOSE TWO THINGS TENDED TO BE THE LARGEST IMPACTS ON WHETHER A BUILDING COULD GET AN AFFORDABLE INSURANCE RATE OR NOT.

SO THE LOAN PROGRAM THAT I SET UP IN MY BILL IS TO ALLOW THE STATE TO GIVE THOSE CONDOMINIUMS LOANS TO SPECIFICALLY REPIPE AND SPRINKLER THEIR BUILDINGS.

AS THEY REPAY THAT LOAN OVER TIME, THE THOUGHT IS THAT IF THEIR INSURANCE RATE COMES DOWN, THAT SURPLUS WILL BE USED TO PAY BACK THE LOAN AND ALSO THE UNIT ITSELF WILL GAIN SIGNIFICANTLY IN VALUE BECAUSE IT'LL BE NOW A UNIT WITH NEW PIPES WITH SPRINKLER SYSTEMS THAT IS MORE VALUABLE TO SELL AND OWN.

>> Daryl: DO YOU HAVE ANY IDEA HOW MUCH YOU'D HAVE TO HAVE IN THAT LOAN FUND GIVEN HOW MANY CONDOS WE HAVE?

>> THAT IS CERTAINLY AN ISSUE.

MY INITIAL THOUGHT WAS ABOUT $500 MILLION WOULD DO IT BUT I'VE TALKED TO -- >> Daryl: $500 MILLION?

>> WE HAVE A LOT OF CONDOS WE THINK WILL BE INTERESTED IN THIS PROGRAM THAT CAN'T GET TRADITIONAL LOANS.

BUT HONESTLY, AS MUCH MONEY AS WE CAN GET -- IF WE DO GET LESS MONEY -- IF WE CAN'T SERVICE EVERYBODY, IF WE CAN'T OFFER EVERYONE A LOAN BECAUSE WE CAN'T HAVE THE CAPITAL OF IT, WE HAVE TO PUT MONEY ASIDE SO THE MONEY GETS TO THE MOST NEEDY CONDOS THAT WILL GET THE MOST BANG FOR YOUR BUCK.

>> Daryl: GREG, DID YOU FOLKS GO THROUGH THE PROCESS OF TRYING TO UPGRADE THE BUILDING?

WHAT'S THAT LOOK LIKE?

>> WE HAVE TWO LOANS.

WE HAD TAKEN OUT A $5 MILLION LOAN A NUMBER OF YEARS AGO TO -- >> Daryl: HOW MANY UNITS IN YOUR BUILDING BY THE WAY?

>> 183.

>> Daryl: IT'S A HIGH RISE?

>> TWO BUILDINGS THAT ARE CONNECTED.

A HIGH RISE.

18 STORIES ON ONE SIDE.

>> Daryl: THAT'S A BIG BUILDING.

>> YEAH.

>> Daryl: YOU HAVE TWO LOANS.

ONE FOR 5 -- >> ONE FOR $2 WE TOOK OUT RECENTLY.

THERE'S PROJECTS THAT'S BEEN DEFERRED.

I WANT TO INTRODUCE DPP.

>> Daryl: DEPARTMENT OF PERMITTING AND PLANNING.

>> DEPARTMENT OF PERMITTING AND PLANNING.

WHEN YOU GO TO APPLY FOR A PERMIT AND YOU HAVE TO WAIT SIX MONTHS, A YEAR, A YEAR AND A HALF, THE MAINTENANCE GETS DEFERRED EVEN MORE, AND UNFORTUNATELY WHAT'S HAPPENING IS PROJECTS ARE BEING DONE WITHOUT PERMITS.

AND THIS IS KIND OF A PERVASIVE THING ACROSS THE ISLAND.

>> Daryl: THAT'S A WHOLE OTHER SHOW.

>> THEY GET DONE IMPROPERLY.

IT ADDS ANOTHER ELEMENT TO THE INSURANCE ISSUES.

>> Daryl: WE HAVE TO ADD A PERMIT TO THIS.

IT WON'T FIX THAT PART OF THE PROBLEM?

>> YES.

>> Daryl: ALEX McLAURY, WHAT KIND OF COSTS ARE YOU SEEING FOR THESE REPAIR PROJECTS?

I MEAN, YOU'VE BEEN DEALING WITH THESE CONDOS -- YOU WERE SHAKING YOUR HEAD IN APPROVAL THE IDEA OF GETTING THESE IMPROVEMENTS INTO THESE CONDOS.

DOES IT WORK OUT THAT IF YOU SPEND THE MONEY HERE, YOU'RE GOING TO SAVE IT HERE?

WHAT KIND OF MONEY DOES IT COST TO REHAB THE WATER SYSTEM IN A CONDO?

>> YEAH, TO YOUR POINT, IT'LL BE MILLIONS OF DOLLARS ESPECIALLY FOR THE HIGH RISE BUILDINGS.

IT'S A LARGE BUILDING.

IT'S A LOT TO TAKE CARE OF.

THE INVESTMENT IN THAT BUILDING WILL BE WAY MORE SERVED REPAIRING THE BUILDING ITSELF.

I ALWAYS TELL THE HOA'S THAT I WORK WITH, EVEN IF YOU AREN'T IN A INSURANCE CARE RIGHT NOW AND PAYING THE $700,000, YOU MIGHT BE ONE OF THE ONES PAYING THE $100,000 OR $200,000 AND IF YOU PUT THAT $500,000 TOWARDS CAPITAL IMPROVEMENT, THAT'S JUST AN INVESTMENT THAT IS GOING TO ONLY PROTECT YOUR BUILDING BUT IT'S ALSO GOING TO PROTECT FROM YOU GOING INTO THAT CIRCLE SCIENCE MARKET.

NOT ALWAYS THE EASIEST DECISION TO MAKE TO RAISE THE MAINTENANCE FEES BUT IT'S AN IMPORTANT CONVERSATION TO HAVE AS A BOARD TO REALIZE THIS IS AN IMPROVEMENT, A CAPITAL IMPROVEMENT THAT IS GOING TO BENEFIT EVERYBODY FOR THE LONG RUN FOR THIS BUILDING.

>> Daryl: BACK TO SCOT AND ALSO TO JERRY BUMP, WHAT IS THE -- OK, SO THAT'S ONE ASPECT OF THE SOLUTION HERE IS PROVIDING MONEY TO CONDOS THAT NEED LOANS SO THEY CAN GET UPGRADED, AND IT'S THEIR FINANCIAL CALL, RIGHT?

I MEAN, THAT'S THE CALL OF THE BOARD.

>> UH-HUH.

>> UH-HUH.

>> Daryl: AND SO WHAT OTHER ELEMENTS ARE THERE IN THE SOLUTION FOR THE CONDO SIDE OF THE INSURANCE OTHER THAN THIS LOAN?

SCOT OR JERRY?

>> I CAN JUMP IN.

>> Daryl: SURE.

>> SO MOST TIMES A BUILDING HAS TWO PARTS TO THEIR COVERAGE OF THEIR MASTER POLICY.

ONE IS BASICALLY MOSTLY ALL PERILS OTHER THAN HURRICANE.

THE OTHER PART IS HURRICANE.

TYPICALLY THE HURRICANE PIECE REPRESENTS ABOUT 40% OF THE OVERALL PREMIUM.

AND SO A LOT OF THOSE HUGE SPIKES WE'VE SEEN IN THE LAST TWO YEARS ARE RELATED TO THAT, THE HURRICANE OR WHAT THEY CALL CATASTROPHIC COVERAGE.

A LOT OF THAT HAS BEEN DRIVEN BY DISASTERS WORLDWIDE.

THOSE DISASTERS WORLDWIDE ARE BEING COVERED BY WHAT IS CALLED A GLOBAL REINSURER.

MOST OF THE INSURANCE COMPANIES, WHEN THEY WRITE YOU A POLICY, THEY'RE NOT KEEPING ALL OF THAT RISK.

THEY CHOOSE TO WHAT WE CALL SEED OR SEND SOME OF THAT RISK TO A GLOBAL REINSURER.

THOSE GLOBAL REINSURERS -- >> >> Daryl: BASICALLY HIRE SOMEONE ELSE TO TAKE OUT 0 THAT RISK?

>> THEY WANT TO SPREAD OUT THE RISK.

THEY DON'T WANT TO KEEP A CONCENTRATION OF THE RISK JUST LIKE EVERYBODY ELSE.

ONE OF THE THINGS IS BACK IN THE 80'S, THE 90'S, THE YEAR 2000'S, WE HAD MAYBE ADJUSTED FOR INFLATION AN AVERAGE OF FIVE TO SIX EVENTS PER YEAR THAT REACHED OVER $1 BILLION.

IN THE LAST FIVE YEARS, WE'VE AVERAGED 23 EVENTS THAT HAVE AVERAGED OVER -- I MEAN GONE OVER $1 BILLION.

>> Daryl: IN HAWAI'I?

>> NO, U.S. WE'RE ONLY TALKING ABOUT -- >> Daryl: I USUALLY KNOW ABOUT THOSE.

>> WE'RE ONLY TALKING ABOUT U.S. GLOBALLY, I DON'T KNOW WHAT THE NUMBERS ARE, UM, BUT, YOU KNOW, THOSE REINSURERS ARE INSURING -- SO THEY'RE CHARGING THE INSURANCE COMPANIES MORE FOR THEIR REINSURANCE AND THEN THOSE INSURANCE COMPANIES ARE HAVING TO PASS ALONG THAT COST TO THE CONSUMERS.

THE POLICY OWNERS.

>> Daryl: BACK TO SCOT.

>> ANOTHER PART OF THAT, BECAUSE THE REINSURANCE COSTS ARE GROWING SO MUCH, LOCAL INSURANCE COMPANIES I TALKED TO ARE REALIZING THEY DON'T HAVE THE CAPACITY TO INSURE SO MANY PEOPLE.

THE COST TO INSURE A BUILDING NOW IS SO HIGH THEY MAY NOT BE ABLE TO KEEP ALL THE BUILDINGS THEY NORMALLY HAD UNDER THEIR COVERAGE BECAUSE THEY ONLY HAVE SO MUCH CAPACITY OR SO MUCH CAP FOR THE REINSURANCE THAT THEY BOUGHT.

SO ONE OF THE THINGS WE'RE TRYING TO DO IS TO RESTART BOTH HHRF, THE HAWAI'I HURRICANE RELIEF FUND AND THE HAWAI'I INSURANCE IS HAVE THE STATE STEP IN AS AN INSURER.

PART OF THAT IS TO ADD CAPACITY TO THE MARKET.

IF YOU CAN'T GET INSURANCE POLICY THROUGH ANY OF THE ADMITTED CARRIERS, YOU CAN TURN TO THE STATE'S INSURANCE MARKET -- NOT SAYING IT'S GOING TO BE CHEAP, BUT AT LEAST WE'LL ADD CAPACITY TO THE MARKET.

THE LONG-TERM SOLUTION SO THAT IS TO ATTRACT MAINLAND INSURANCE COMPANIES OR COMPANIES THAT AREN'T HERE YET TO COME INTO THE MARKET TO EXPAND THAT CAPACITY AND HOPEFULLY TO GET SOME OF OUR LOCAL GUYS TO COME BACK INTO THE CONDO MARKET, TOO, WHO MIGHT OFFER AUTO RIGHT NOW BUT MAY BE ABLE TO OFFER HOME INSURANCE AS WELL.

>> Daryl: LET ME ASK THIS QUESTION, THOUGH, AND I'VE GOT QUESTIONS HERE I WANT TO GET TO, BUT YOU GUYS ARE ACTUALLY ANSWERING A LOT OF THE QUESTIONS THAT HAVE COME IN.

UM, WHY IS -- WHY IS THAT I AS A TAXPAYER OR A SINGLE FAMILY HOME OWNER -- I DON'T MEAN TO SOUND SELFISH, WHY SHOULD I BAIL OUT THESE CONDOS?

WHAT'S THE INTEREST TO ME AS A SINGLE HOME OWNER BAILING OUT THESE CONDOS?

IRFEEL BADLY FOR THEM -- I FEEL BADLY FOR THEM.

I WISH IT WASN'T GOING ON BUT THEY'RE THE ONES THAT MADE THE DECISIONS THAT LED TO THE CONDITION THEY'RE IN.

WHY DOES THE STATE -- WHAT IS THE STATE'S INTEREST IN STEPPING IN?

>> OUR HOUSING MARKET IS TERRIBLE RIGHT NOW.

A LOT OF THESE PEOPLE, THEY'RE LIVING IN CONDOS NOT BECAUSE THEY LOVE CONDO LIFE.

NO OFFENSE, GREG, BUT BECAUSE THEY CAN'T AFFORD A SINGLE FAMILY HOME.

WE'RE TALKING ABOUT PEOPLE WHO IF THEY CAN'T AFFORD A CONDO, THEY MIGHT BE ON THE VERGE OF HOMELESSNESS HERE.

AS A TAXPAYER, NOT AS A SINGLE FAMILY HOMEOWNER, BUT AS A TAXPAYER, THAT SHOULD BE EVERYONE'S CONCERN.

IF WE PUSH PEOPLE INTO HOMELESSNESS BECAUSE THEY CAN'T AFFORD THEIR CONDOS, IT'S NOT LIKE WE HAVE A HUGE SURPLUS OF HOUSING.

WE HAVE THE OPPOSITE OF THAT.

IF WE DON'T KEEP PEOPLE IN THEIR CONDOS BECAUSE THEY CAN'T AFFORD IT, WE'RE GOING TO BE PAYING ONE WAY OR ANOTHER, WHETHER THEY'RE LIVING IN A CONDO OR WHETHER THEY'RE LIVING ON THE STREET.

>> Daryl: THAT'S WELL SAID.

I DON'T MEAN TO SOUND HOSTILE.

I THINK THAT'S A FAIR QUESTION.

>> I CAN JUST ADD, DARYL, NONE OF THE BILLS THAT I'VE SEEN ARE LIKE DIRECT SUBSIDIES, LIKE GIVING STATE TAXPAYER DOLLARS TO THE CONDOS THAT ARE IN TROUBLE.

THESE ARE LOAN PROGRAMS.

YES, MAYBE LOW INTEREST OR NO INTEREST.

EVEN THE HURRICANE FUND THAT IS GETTING BACK UP AND RUNNING, IT HAD EXISTING MONEY LEFT OVER FROM WHEN IT WAS ACTIVE BACK IN THE 90'S.

THEY'RE GOING TO REPURPOSE THAT MONEY AND PROVIDE COVERAGE, BUT IT'S STILL GOING TO BE THEIR HAVE TO PAY PREMIUMS.

THEY HAVE TO ACT AS AN INSURER.

THEY HAVE TO PAY PREMIUMS TO THAT FUND.

THE FUND -- THE MONEY THAT'S IN THERE COULD GO TO BUY REINSURANCE AND HELP PROVIDE MORE COVERAGE TO MORE ASSOCIATIONS.

>> Daryl: OK, COUPLE OF QUESTIONS CAME IN ON THIS SPECIFIC THING.

CAN ANYTHING BE DONE ABOUT ALL OF THOSE CONDOS ON THE BLACKLIST?

I GUESS THAT'S PEOPLE WHO CAN'T GET INSURANCE.

A LOT OF CONDOS HERE AREN'T INSURED.

PEOPLE CAN'T GET CONVENTIONAL LOANS.

SOME CONDOS COULD DECIDE JUST NOT TO BE INSURED AND THEN NOT RAISE THE HOA FEES.

THE OTHER CONDOS ARE SEEING TRIP UNTIL INCREASES.

HOA FEES ARE RIDICULOUS.

IT'S SO UNAFFORDABLE.

ANOTHER QUESTION IS REGARDING DEFERRED MAINTENANCE, ISN'T THAT NEGLIGENCE ON THE PART OF THE RESPONSIBLE PARTY AND SUBJECT TO LEGAL ACTION?

SO I THINK THE OVERALL QUESTION IS CAN YOU GO UNINSURED?

I GUESS THE BIG REASON YOU DON'T GO UNINSURED IS BECAUSE YOU CAN'T SELL OR PEOPLE CAN'T BUY IN YOUR BUILDING.

>> THE BLACKLIST I THINK IS REFERRING TO THE BANKS.

SO THE BANKS HAVE A LIST OF CONDOS THEY DON'T WANT TO ISSUE LOANS TO BECAUSE IF THEY ISSUE A LOAN TO THAT UNIT OWNER THAT BUILDING, THEY CAN'T SELL THAT LOAN TO FANNIE MAE AND FREDDIE MAC BECAUSE THE BUILDING IS NOT 100%.

>> Daryl: THE FEDERAL BANKS?

>> THEY'RE THE FEDERAL BANKS.

THAT'S HOW THE BANKS LEND MONEY.

THEY CAN ISSUE A LOT OF LOANS BECAUSE THEY CAN SELL PART OF THE LOANS OR ALL OF THE LOANS TO FANNIE AND FREDDIE AND ISSUE LOCAL LOANS TO OUR INSURERS.

FANNIE AND FREDDIE REQUIRE 100% OF THE BUILDING TO BE INSURED.

IF THE BUILDING IS UNDERINSURED OR UNINSURED, THE INSTITUTIONS THAT ISSUE LOANS DON'T WANT TO -- YOU KNOW, THEY FEEL RESTRICTED.

>> THERE'S AN INHERENT RISK ON INSURING A BUILDING TO A PERCENTAGE OF THE TOTAL VALUE OF THE PROPERTY.

IF YOU ONLY INSURE YOUR HOUSE TO 10% AND YOU HAVE A TOTAL LOSS, YOU'RE ONLY GETTING 10% OF THAT PREMIUM OR THAT LIMIT BACK TO YOU.

>> Daryl: BY LAW, CAN YOU DO THAT?

>> NO.

>> Daryl: CAN YOU PURPOSEFULLY UNDERINSURE?

>> TECHNICALLY YES.

>> THERE'S ANOTHER ELEMENT TO THAT TO ANSWER THAT QUESTION, THE GOVERNING DOCUMENTS OF THE ASSOCIATION TYPICALLY ESTABLISH YOU HAVE TO FULLY INSURE THE PROJECT.

SO IF THAT'S A REQUIREMENT IN THE GOVERNING DOCUMENTS, THAT QUESTION IS SPOT ON, BECAUSE, YES, THAT'S THE RESPONSIBILITY OF THE BOARD AND THE MANAGEMENT COMPANY TO KIND OF OVERSEE AND MAKE SURE THAT THAT'S HAPPENING.

>> Daryl: IS THAT THE REASON WE HAVE SO MANY LAWSUITS BETWEEN BOARD OF DIRECTORS AND THEIR MEMBERS?

>> ONE OF THE REASONS.

>> YES.

YES.

>> I WILL STIPULATE THAT THERE IS IN 514B IN THE STATUTES A REQUIREMENT OF 100% THAT THE BOARDS SHOULD MAINTAIN, HOWEVER, THERE'S -- >> Daryl: 100% OF WHAT?

>> SORRY SHOULD HAVE THE BUILDING INSURED UP TO 100%.

>> Daryl: FOR TOTAL LOSS?

>> FOR TOTAL LOSS THAT WOULD KEEP THEM IN COMPLIANCE WITH THE FANNIE AND FREDDIE AND THE BANK REQUIREMENTS, HOWEVER, THERE'S A CATCHIOT THAT IF IN THE BYLAWS, THEY CAN EDIT THAT AND REDUCE IT.

THE BOARD ITSELF COULD CHOOSE TO BE LESS THAN 100%.

>> Daryl: I WAS KIND OF SURPRISED BY THAT, BECAUSE I REMEMBER AFTER THE MAUI FIRE, WE WERE HEARING ABOUT UNDERINSURED CONDOS IN LAHAINA AND THEN WE HEARD, OH, THERE'S A REQUIREMENT THAT YOU HAVE TO -- YOU HAVE TO INSURE FOR COMPLETE LOSS.

TOTAL LOSS.

AND I ALWAYS THOUGHT THAT WAS BECAUSE THE FIRE BURNS DOWN THE WHOLE BUILDING.

THAT HAPPENS VERY, VERY RARELY, BUT THIS REQUIREMENT THAT YOU HAVE 100% INSURANCE IS IT BECAUSE IT COULD ALL BURN DOWN OR GET BLOWN UP?

WHY WOULD YOU REQUIRE 100% INSURANCE WHEN IT'S SO RARE THAT A BUILDING BURNS DOWN IN ITS ENTIRETY?

CAN YOU HELP ME WITH THAT, ALEX?

>> YEAH, I MEAN, IT GOES BACK TO WHAT JERRY WAS SAYING.

FREDDIE AND FANNIE IS WHERE THE WHOLE CONVERSATION STARTSD >> Daryl: THE BANKS.

>> IF YOU CAN'T LOAN IN THE BUILDING, PEOPLE WON'T BE ABLE TO SELL.

THERE'S AN INHERENT RISK THAT'S, OK, IT COULD HAPPEN, SO IT'S -- THEY LOOK AT IT AS WELL, WE'RE GOING TO TRY TO MITIGATE ANY OF OUR POTENTIAL LOSSES AND JUST SAY YOU HAVE TO DO IT 100%.

>> Daryl: OK, SO, ANOTHER QUESTION FROM A VIEWER ABOUT THE TROUBLE PEOPLE ARE IN FROM RICHARD IN KAILUA, THERE ARE A LOT OF FORECLOSURES ON CONDOMINIUMS.

DOES THIS HAVE ANYTHING TO DO WITH HIGH INSURANCE?

>> I COULD PROBABLY ANSWER THAT A LITTLE BIT.

WE HAVE A LITIGATION IN MY CONDO ASSOCIATION BUT I'M NOT GOING TO DISCUSS IT.

WHAT IS HAPPENING WITH THE FORECLOSURES, SOME OF IT MAY BE RELATED TO INSURANCE, BUT I THINK A LOT OF IT IS JUST RELATED TO PEOPLE NOT ABLE TO PAY THEIR MAINTENANCE FEES.

IF YOU DON'T PAY YOUR MAINTENANCE FEE, YOU GET FORECLOSED ON.

IT'S FOR VARIOUS REASONS BUT CLEARLY AS I MENTIONED EARLIER, YOU KNOW, MY MAINTENANCE FEE WAS $570 AND IT'S $1150 RIGHT NOW.

>> Daryl: LET ME WRAP THIS PART OF OUR DISCUSSION UP BECAUSE, UM, I THINK WE NEED TO GET INTO FIRE BECAUSE OF THE LAHAINA FIRE.

MAYBE THAT'S LESS OF A CONVERSATION THAN I THOUGHT BECAUSE WE'VE HAD THIS CONVERSATION, BUT, UM, IF I'M A PERSON IN THE MARKET FOR A CO CONDO, WHAT SHOULD I BE LOOKING FOR TO AVOID WALKING INTO A MESS LIKE THIS?

SCOT, HOW ABOUT YOU?

>> IF YOU'RE IN THE MARKET FOR A CONDO, THIS IS NOT MY AREA OF EXPERTISE, BUT JUST HAVING BEEN IN THIS AREA FOR A LITTLE WHILE NOW, I WOULD CERTAINLY BE AS ASKING, UM, KIND OF THE SAME QUESTIONS THAT AN INSURANCE COMPANY WOULD BE ASKING.

HOW MANY LOSSES HAVE YOU EXPERIENCED?

WHEN'S THE LAST TIME YOU REROOFED?

WHEN'S THE LAST TIME YOU FIXED ANY PIPING?

JUST TRY TO FIGURE OUT WHAT KIND OF RISK YOU'RE BUYING INTO.

HOW MUCH HAS YOUR INSURANCE INCREASED OVER THE LAST FIVE YEARS?

THAT'LL BE VERY TELLING ABOUT THE NATURE OF THE BUILDING.

>> Daryl: DO THEY HAVE TO TELL ME ALL OF THAT, JERRY?

IS THERE A LAW SOMEWHERE THAT SAYS THEY HAVE TO TELL ME IF I'M A BUYER?

>> YEAH, DURING THAT I -- I GUESS I'M NOT A REAL ESTATE EXPERT BUT I GUESS IN THE EXPLORATORY PHASE WHERE YOU GET THE CONDO DOCS, THE MAIN THING I WOULD LOOK FOR IS WHAT DOES THE RESERVE LOOK LIKE?

ARE THEY STARTING TO PUT MONEY AWAY FOR THE BIG CAPITAL IMPROVEMENTS?

IF YOU'RE NOT PUTTING IT AWAY NOW, SOMETHING WILL BREAK IN THE FUTURE.

YOU HAVE TO PAY FOR IT.

THE WAY THAT'S BEEN PAID IN THE LAST COUPLE OF YEARS, ESPECIALLY FOR INSURANCES, SPECIAL ASSESSMENTS.

ANY SPECIAL ASSESSMENTS ON THE TABLE?

IF THERE ARE, WHAT ARE THEY FOR?

THAT WILL GIVE YOU A LOOK AT HOW THAT CONDO IS OPERATING.

>> Daryl: IS THERE A WAY OF KNOWING THAT THE INSURANCE IS ALREADY AS EXPENSIVE AS IT'S GOING TO GET?

>> I THINK THAT'S A GOOD QUESTION.

I THINK WE'RE SEEING POSITIVE SIGNS OF THE MARKET STARTING TO SELF-CORRECT.

SO THERE WAS THIS REALLY BIG HUGE OVERREACTION, UM THAT OCCURRED BETWEEN 2023 AND 2024 AND WE'RE STARTING TO SEE IT COME BACK DOWN IN 2025; HOWEVER, IT'LL NEVER GET BACK DOWN TO WHERE IT WAS PRE2023.

AND THERE'S MANY REASONS FOR THAT.

I MEAN, IF YOU TALK TO KIND OF THE AGING COMMUNITY AND THEY'LL SAY PRIOR TO 2023, 2020, 2021, THE PREMIUMS PEOPLE WERE PAYING WERE WELL BELOW NATIONAL LEVELS.

LIKE HAWAI'I'S MARKET WAS PAYING VERY CHEAP.

THAT'S WHAT EXASPERATED HAVING EVEN THE SUPER HUGE JUMP IS THEY WERE ALREADY STARTING REALLY LOW AND THEN ALL OF THESE FACTORS KICKED IN LIKE INFLATION, UM, YOU KNOW, NATURAL DISASTERS AND REINSURANCE COSTS, THINGS OF THAT NATURE.

WE'RE STARTING TO SEE THE REINSURANCE MARKETS -- AGAIN, A LOT OF IT IS DRIVING ON THE CONDO SIDE, THEY'RE STARTING TO BRING THE RATES DOWN.

I DON'T KNOW IF ALEX HAS EXAMPLES.

>> YOU'RE EXACTLY RIGHT.

IN THE INSURANCE WORLD, WE CALL IT HARD MARKET.

LACK OF CAPACITY.

PREMIUM INCREASES.

IT'S HARDER TO GET INSURANCER.

THE PEAK -- INSURANCE.

THE PEAK HARD MARKET WAS UNDOUBTEDLY BETWEEN APRIL OF LAST YEAR TO AUGUST.

BETWEEN THOSE TIME PERIODS, IN ORDER TO GET AN INSURANCE PO POLICY, YOU'RE LOOKING AT 10 INSURANCE CARRIERS.

JUST THE AMOUNT OF ASSOCIATION WITH THE ADMINISTRATIVE COSTS TRYING TO GET 10 DIFFERENT INSURANCE CARRIERS TO OFFER UP $50 MILLION, $2.5 TO $5 MILLION PER LAYER ADDS INHERIT COSTS.

WE'RE SEEING AGGREGATES GOING UP PER CARRIER.

INSTEAD OF DOING IT WITH 10, YOU'RE DOING IT WITH FOUR OR THREE OR TWO OR ONE.

>> SCOT MATAYOSHI, MY ASSUMPTION WOULD BE IF YOU'RE BUYING A CONDO, YOU HAVE A REAL ESTATE AGENT.

IS THERE ANY LAW THAT SAYS THE REAL ESTATE AGENTS HAVE TO DO THIS DUE DILIGENCE FOR YOU?

IF THEY DON'T AND YOU END UP WALKING INTO A MESS, DO YOU HAVE ANY ACTION YOU CAN TAKE?

>> THIS MIGHT BE MORE OF A DCCA QUESTION.

[EVERYONE TALKING AT ONCE] I WOULD SAY FIND A GOOD REALTOR.

I'M NOT -- I'M HONESTLY NOT FAMILIAR WITH EXACTLY WHAT PROCESS THEY GO THROUGH FOR T THAT.

YEAH.

>> Daryl: WHAT WOULD YOU ADVISE SOMEONE WHO IS TRYING TO BUY A CONDO?

>> SINCE I BOUGHT RECENTLY NOT THAT LONG AGO, UM, THE DISCLOSURES YOU GET ARE LIMITED AND THEY'RE NOT ALWAYS 100% ACCURATE.

I DO HAVE EXPERIENCE RECENTLY WHERE AN OWNER WAS TRYING TO SELL AT MY CONDOMINIUM ASSOCIATION AND HE WAS REQUESTING THE DISCLOSURE DOCUMENTS.

HE WAS REQUESTING AND REQUESTING.

EVENTUALLY WHAT HE GOT WASN'T ALL OF THE ANSWERS.

>> Daryl: GIVEN THE STATE OF YOUR BUILDING, THAT'S DEPRESSING.

>> THE REAL ESTATE AGENTS ARE TRYING TO SELL THE PROPERTY.

THEY'RE NOT ALWAYS BEING FORTHCOMING WITH ALL THE INFORMATION.

I'VE SEEN THEM LIE ABOUT THINGS BLATANTLY ON THEIR ADVERTISEMENTS.

I HAVE WATCHED COMMERCIALS ON TV'S WHERE THEY BLATANTLY LIED.

IT'S CONCERNING.

>> Daryl: IT SOUNDS LIKE ANOTHER SHOW.

HAVING MAINTENANCE FEE TAX DEDUCTIBLE MAY SOLVE SOME OF THE HIGH INSURANCE ISSUES.

BUT IT WOULD CAUSE OTHER ISSUES, I WOULD GUESS?

>> MAKING ANYTHING TAX DEDUCTIBLE, YOU'RE GOING TO PAY FOR IT ONE WAY OR ANOTHER.

YOU'RE NOT GOING TO PAY FOR IT NOW, BUT WE'RE NOT GOING TO GET THE TAX REVENUE AND WE'RE GOING TO NEED TO GET IT ANOTHER WAY OR WE'RE GOING TO HAVE TO CUT OTHER PROGRAMS.

IT'S NOT A ZERO SUM GAME.

>> Daryl: WHEN THE CONDO TOWER FELL DOWN IN FLORIDA, WAS THAT SORT OF A WATER SHED FOR THE INSURANCE INDUSTRY?

DID THAT ALSO LIKE KICK PEOPLE IN?

>> THAT HAD INSURERS REASSESSING THEIR APPETITE TO ISSUE COVERAGE FOR THESE TYPES OF STRUCTURES FOR SURE.

SO THAT'S WHY WE'RE DOWN TO ONLY THREE COMPANIES THAT ARE ACTUALLY LICENSED IN HAWAI'I THAT ACTUALLY WANT TO WRITE THIS COVERAGE, AND EVEN RIGHT NOW, LIKE ALEX ALLUDED TO, THEIR APPETITE FOR HOW MUCH THEY WANT TO WRITE IN EACH BUILDING IS USUALLY NOT THE ENTIRE BUILDING VALUE, SO MOST OF THESE BUILDINGS THEY MIGHT GET A PIECE FROM THE ADMITTED MARKET OR THE LICENSED MARKET BUT THE REST IS COMING FROM THE SURPLUS LINES MARKET.

>> Daryl: OK, LET ME SHIFT NOW.

MELVIN CALLED IN.

AFTER THE MAUI FIRES IN 2023 -- EXCUSE ME -- MY HOME INSURANCE CARRIER TOLD ME IT WOULDN'T BE REDOING MY POLICY.

I LIVE ON THE BIG ISLAND.

I FOUND A NEW CARRIER BUT AT A HIGHER RATE.

THIS IS SCARY.

HELP!

WHAT'S GOING ON WITH THE FIRE SIDE AND SINGLE FAMILY HOMES NOW?

YOU DON'T DO SINGLE FAMILIES SO MUCH OR DO YOU -- >> HERE AND THERE.

>> Daryl: WHAT'S IT LOOKING LIKE?

>> UM, I WOULD SAY THE RATES ARE INCREASING FROM ALL ACCOUNTS I'VE HEARD.

SOUNDS LIKE MOST OF THEM ARE.

A LOT OF THE SINGLE FAMILY HOME MARKETS ARE ADMITTED SO THEY'RE SENDING TO THE INSURANCE CARRIER TO SAY, HEY, THIS IS THE AMOUNT WE NEED TO PAY FOR IT BECAUSE JUST LIKE THE COMMERCIAL POLICIES FOR AN ENTIRE BUILDING, THOSE SINGLE FAMILY HOMES ARE STILL SELLING OFF THAT REINSURANCE TO REINSURANCE CARRIERS.

SO THEY'RE STILL BEING EFFECTED BY THAT INCREASED REINSURANCE COSTS WHICH -- >> Daryl: ONCE AGAIN, JUST SO PEOPLE UNDERSTAND WHAT YOU'RE SAYING IS THAT EVEN IF I HAVE A SINGLE FAMILY HOME, MY INSURANCE COMPANY IS STILL CONTRACTING WITH THE REINSURANCE COMPANIES WHO ARE DEALING WITH THE CONDOS AND WITH THE FIRES AND NATURAL DISASTERS AND STUFF SO THAT'S AFFECTING IT ALL?

>> I THINK A GOOD KIND OF ANALOGY OR STATISTIC OF SEEING HOW INTERCONNECTED THE REINSURANCE MARKET S THERE'S 20 REINSURANCE CARRIERS IN THE WORLD THAT INSURE 80% OF THE TOTAL RISK.

IT'S A VAST POOL OF RISKS THAT KIND OF SPREAD ACROSS ALL OF THE INDUSTRY.

HERE LOCALLY, WE FEEL THE REINSURANCE COSTS INCREASE.

DOWN IN FLORIDA IF THERE'S A MAJOR HURRICANE THAT HIT THERE OR A DEEP FREEZE IN TEXAS OR WILDFIRES IN CALIFORNIA, IT'S ALL INTERCONNECTED.

>> IF YOU DON'T MIND -- >> Daryl: YEAH.

>> ON OUR END LIKE ALEX ALLUDED TO, IN THE SINGLE FAMILY HOME MARKET, WE HAVE ENOUGH ADMITTED CARRIERS.

MOST, NOT ALL, BUT MOST -- >> Daryl: LOCALLY REGULATED CARRIERS?

>> CORRECT.

THEY HAVE TO FILE THEIR RATES WITH US.

WE'VE -- AND WE'VE BEEN -- AND THERE'S BEEN COMPLEX AND RATHER LARGE INCREASES.

WE HAVE TO LOOK AT THEM AND JUSTIFY THEY'RE ADEQUATE, NOT DISCRIMINATORY.

THE LAST ONE IS NOT EXCESSIVE.

NOW, EXCESSIVE DOESN'T NECESSARILY MEAN AFFORDABLE.

IT JUST MEANS THAT THEY'RE NOT CHARGING AN EXCESSIVE PREMIUM TO GENERATE EXCESSIVE PROFIT.

THERE'S TIMES WHERE RATES COME IN AND FILE AND WE PUSH DOWN ON THEM.

WE GO BACK AND SAY WE'RE NOT GOING TO GRANT YOU THIS.

YOU WANT AN 80% INCREASE.

WE'RE ONLY GOING TO AUTHORIZE 35% OR WHATEVER OUR ACWARES -- ACTUARIES LOOK AT THEIR RATES.

THAT IS OCCURRING.

JUST TO FINISH THAT THOUGHT REAL QUICK.

>> Daryl: YEAH, SURE.

>> ON THE CONDO SIDE LIKE I MENTIONED EARLIER, YOU'RE SEEING 300 OR 500%.

THE SINGLE FAMILY HOMES ARE GOING TO START SEEING 60% OR 70% AT TIMES.

SOME OF IT IS A CATCH UP BECAUSE IT TAKES LONGER FOR THEM TO GET THEIR RATE APPROVAL THROUGH US.

SOME OF IT IS ON THE HURRICANE PIECE.

MOST SINGLE FAMILY HOMES, AGAIN, THEY'LL GET THE BASE COVERAGE AND THEN THEY'LL GET THE HURRICANE COVERAGE WITH IT.

THE HURRICANE PIECE IS SIMILAR ON THE CONDO SIDE IS THAT THEY'RE PAYING TO THOSE REINSURANCE PREMIUM COMPANIES, THOSE PREMIUMS AND HAVE TO PASS IT ALONG.

SO A LOT OF OUR INCREASES THAT WE'VE BEEN GRANTING HAVE BEEN RELATED TO THAT HURRICANE PIECE.

>> Daryl: BECAUSE IT GOES TO THE REINSURANCE COMPANIES?

SO JUST I WANT TO MAKE SURE, FOR THE VIEWERS, I WANT TO MAKE SURE, I DON'T THINK THEY EVEN KNOW THAT THE INSURANCE DIVISION APPROVES OR REJECTS THE RATES OF THE HOME OWNERSHIP INSURANCE COMPANIES HERE.

IF SOMEONE GETS WHAT THEY THINK IS AN EXCESSIVE BID OR A BIG INCREASE, ARE YOU THE FOLKS THEY SHOULD TURN TO?

>> ABSOLUTELY.

THEY CAN TURN TO US AND SAY, HEY, DID YOU APPROVE THIS?

WHY DID YOU APPROVE THIS?

WE CAN LOOK AT IT AND MAKE SURE IT MATCHES WITH THE FILING WE APPROVED.

THEY CAN REACH OUT TO US.

>> I WANT TO ADD ONE THING TO THIS.

FOR CONDOMINIUM ASSOCIATIONS OR CONDOMINIUM LIVING, YOU DON'T JUST HAVE THE ASSOCIATION'S MASTER POLICY.

THE INDIVIDUAL CONDOMINIUM OWNERS HAVE POLICIES.

THERE'S MANY MORE PROVIDERS FOR THAT GROUP AND THOSE RATES ARE STARTING TO GO UP, TOO, BUT THEY'RE CONSIDERED INDIVIDUAL HOMES.

SO YOU ARE REALLY GETTING HIT TWICE WHEN YOU LIVE IN A CONDOMINIUM.

YOU HAVE TO PAY THE HO6 POLICY, REQUIRED TO PAY IT AND THEN YOU HAVE TO PAY A CONTRIBUTION TOWARDS THE MASTER POLICY.

>> Daryl: ISN'T LIKE CONDO OWNERS' INDIVIDUAL POLICIES AN OPTIONAL THING?

>> NO, IT'S TYPICALLY REQUIRED AT MOST ASSOCIATIONS YOU HAVE TO HAVE A POLICY.

>> Daryl: I'M GETTING MIXED UP WITH RENTAL INSURANCE.

>> THAT'S DIFFERENT.

>> Daryl: THAT'S A DIFFERENT THING?

>> YES.

>> Daryl: OK. HOW MUCH HAS WILDFIRE AFFECTED THESE RATES?

THE MAUI WILDFIRES SPECIFICALLY AND NOW WE HAVE THE CALIFORNIA WILDFIRES.

>> STARTING IN ON THE INDIVIDUAL HOME OWNER'S POLICIES, WE GET THAT QUESTION A LOT.

SO WHEN THOSE RATE FILINGS COME IN, WE SPECIFICALLY TELL INSURERS YOU CAN'T INCLUDE THE LOSSES FROM LAHAINA.

THE REASON BEING IS WE VIEW THAT AS A ONE-TIME EVENT, RIGHT?

IT'S NOT SOMETHING THAT WILL REOCCURRING ON A NORMAL BASIS.

YOU CAN'T PUT THAT IN.

>> Daryl: YOU CAN'T SET A RATE BASED ON WHAT HAPPENED IN MAUI?

>> CORRECT, TO SOME EXTENT.

SO BUT WHAT ENDS UP HAPPENING INDIRECTLY IS WHEN THEY GO AND TRY TO GET REINSURANCE, THE REINSURER TAKES INTO ACCOUNT THAT NOW HAWAI'I IS ON THE MAP FOR WILDFIRE RISK.

WE NEED TO CHARGE MORE BECAUSE THERE'S POTENTIAL THERE FOR MANY COMMUNITIES THAT ARE PRONE TO WILDFIRE RISK.

SO ULTIMATELY, THAT PORTION OF THE RATE THAT THEY HAVE TO PAY FOR THE REINSURANCE, WE DO HAVE TO GRANT.

BUT DIRECT LOSSES, YOU CAN'T -- THEY CAN'T COME IN AND SAY, HEY, I LOST, YOU KNOW, WHATEVER IT IS, 100 MILLION OR A BILLION DOLLARS AND NOW I HAVE TO RAISE MY RATES ONE FOR ONE.

WE DON'T ALLOW THAT.

>> Daryl: YOU'RE NOT REQUIRING HAWAI'I TO PAY FOR ALL OF HAWAI'I LOSSES.

THEY HAVE TO -- I'M NOT PUTTING THIS RIGHT.

HAWAI'I IS NOT JUST A SELF-INSURED LITTLE MARKET.

WE ARE INFLUENCED BY ALL OF THESE GLOBAL FACTORS?

>> ABSOLUTELY.

>> Daryl: SCOT MATAYOSHI, WHEN IT COMES TO THE FIRE IMPACT ON HAWAI'I INSURERS, WHAT HAVE YOU BEEN HEARING IN THE LEGISLATIVE LEVEL ABOUT WHAT HAS TO BE DONE ABOUT FIRE-RELATED INSURANCE?

IS THERE ANY ACTION ON THAT?

>> NOTHING IN PARTICULAR ON F FIRE, BECAUSE, AGAIN, IF WE'RE TALKING ABOUT WHAT THE BIGGEST EFFECTS ARE ON THE INSURANCE RATE, A LOT OF IT IS NOT FIRE.

A LOT OF IT IS WATER.

A LOT OF IT IS REPIPING.

A LOT OF IT IS A LEAKY ROOF LIKE MR. MISSAKIAN IS TELLING US ABOUT.

FIRE IS A BIG FACTOR.

WE HAVE A LARGE BILL COMING THROUGH TO HELP HECO MITIGATE THE RISK OF WILDFIRE.

>> Daryl: THAT'S A WHOLE SEPARATE SITUATION?

>> YEAH.

>> Daryl: TELL ME A LITTLE BIT MORE ABOUT THAT.

WHERE ARE WE NOW?

THAT'S CONTROVERSIAL.

THERE'S DIFFERENCES BETWEEN THE HOUSE AND THE SENATE OVER HOW MUCH TAXPAYERS OR REGULAR RATE PAYERS TO BE PAYING TO HELP HAWAIIAN ELECTRIC THROUGH THE PROCESS.

THAT'S NOT SO MUCH OF AN ISSUE TAKING CARE OF HECO.

>> THAT'LL BE A WHOLE OTHER SHOW AS WELL.

I PROMISE YOU THAT.

WE'RE TAKING STEPS TO MITIGATE WILDFIRE RISK OURSELVES BY TRYING TO DIRECT HECO TO DO WILDFIRE MITIGATION AND FUND WILDFIRE MITIGATION.

HOPEFULLY THAT WILL SOMEWHAT REDUCE THERI THE RISK OF FIRE AND BE REFLECTED IN PEOPLE'S RATES.

>> FROM AN INSURANCE PERSPECTIVE, ANYTHING OUR COMMUNITY COULD DO TO MITIGATE AGAINST RISK WHETHER IT BE PROOFING YOUR HOME AGAINST FIRE RISK OR PUTTING ON HURRICANE CLIPS AND INSTALLING WINDOWS AND THINGS OF THAT NATURE THAT WILL HARDEN YOUR PROPERTY, INSURERS WILL LIKE THAT.

COULD ATTRACT INSURERS TO COME BACK INTO THE MARKET AND WRITE THOSE RISKS.

>> ON THAT NOTE, I REMEMBER TALKING TO SUE.

ONE OF THE THINGS SHE DID TO HELP.

>> Daryl: THE COMMERCIAL REAL ESTATE PERSON?

>> AND VERY KNOWLEDGEABLE IN THE MARKET.

ONE OF THE THINGS SHE DESCRIBED OF DOING TO SOME OF HER CONDO CLIENTS IS SHE HAD THEM LIST ALL THE MAINTENANCE THEY HAD BEEN DOING, WHEN THE LAST REROOFING WAS, REPAINTING, YOU KNOW, JUST EVERYTHING, AND SHE TOOK THAT LIST TO THE INSURANCE COMPANY AND SAID, LOOK, THIS IS A RESPONSIBLE CONDO.

LOOK AT ALL THE THINGS THEY'VE DONE OVER THE YEARS.

SHE'S ACTUALLY BEEN SUCCESSFUL IN GETTING INSURANCE COMPANIES TO SAY, OK, YOU KNOW WHAT?

THEY'VE BEEN TAKING CARE OF THE DEFERRED MAINTENANCE.

WE'LL LOWER THEIR RATES.

>> Daryl: THAT'S DEFINITELY AN INCENTIVE FOR THE INSURANCE COMPANIES TO DO THAT IF THEY CAN DO IT ACROSS THE MARKET.

>> CERTAINLY.

IF YOU'RE PUTTING HURRICANE CLIPS ON YOUR ROOF, IF YOU'RE TRYING TO MITIGATE THE RISK OF WILDFIRES SPREADING BY CUTTING BACK BRUSH, IF YOU'RE REPIPING OR REROOFING OR TAKING CARE OF YOUR BUILDING, CERTAINLY LET YOUR BROKER KNOW SO THAT THEY CAN USE THAT INFORMATION TO TRY TO GET YOUR INSURANCE RATE DOWN.

I THINK THERE ARE WAYS THAT HOMEOWNERS COULD EFFECT THEIR HOMES OR CONDO OWNERS COULD EFFECT THEIR CONDOS THAT COULD DIRECTLY AFFECT THEIR INSURANCE RATES.

IF THEY DON'T KNOW ABOUT THEM, THEN THEY MIGHT AS WELL NOT EVEN HAPPEN.

>> Daryl: I CAN GO TO MY INSURANCE COMPANY AND SAY HEY, I JUST GOT FANCY NEW WINDOWS.

I CUT ALL THE BRUSH AROUND MY HOUSE.

>> I WOULD CHECK WITH THEM FIRST AND FIND OUT WHAT KIND OF DISCOUNTS AND MITIGATION.

>> Daryl: DON'T DO THE WORK FIRST.

>> IT MAY COST YOU $20,000 TO PUT ON A NEW ROOF AND SAVE YOU $1,000, RIGHT, OVER THE -- YOU KNOW, IT'S BETTER THAN HAVING TO PAY AN EXTRA $1,000 AND YOU HAVE A BRAND-NEW ROOF AND LESS LIKELY TO HAVE A CLAIM.

>> Daryl: AND LESS LIKELY TO HAVE YOUR HOUSE BURN DOWN WHICH IS A GOOD THING, TOO.

I HAVE A PILE OF QUESTIONS.

AGAIN, WE'RE MOSTLY GOING BACK TO THE CONDOS AGAIN.

THIS POINT THAT YOU MADE ABOUT PURR MITTING -- PERMITTING AND THE TIME IT TAKES.

IF A CONDO SAYS I'M GOING THROUGH THE PROCESS OF FIXING THIS THING, WILL THAT GET THEIR INSURANCE DOWN RIGHT AWAY SO THAT THEY CAN HAVE MONEY TO DO THE FIX OR DOES THE INSURANCE COMPANY USUALLY WAIT AND SEE THAT IT'S DONE?

>> I THINK IT'S MORE SITUATIONAL.

IT'S KIND OF A CONVERSATION HOW HAS THAT BUILDING LOOKED OVER THE PAST FIVE YEARS?

HAVE THEY HAD MILLIONS OF DOLLARS OF CLAIMS AND NOW THEY'RE LOOKING AT DOING THE REPIPING?

OR IS IT SOMETHING THAT THEY'RE DOING A LITTLE BIT MORE PROACTIVELY AND THEY'VE ONLY HAD ONE AND SAID, OK, WE REALLY NEED TO GET THIS DONE AND LET'S START DOING IT NOW.

I THINK KIND OF LIKE WHAT YOU WERE SAYING, HAVING THAT CONVERSATION WITH YOUR BROKER, KEEPING THEM IN THE LOOP ON WHATEVER YOU'RE DOING FOR THE BUILDING IS REALLY CRUCIAL.

THAT WAIT INSURANCE CARRIER KNOWS THAT, HEY, WE CARE ABOUT OUR BUILDING.

WE WANT TO MAINTAIN IT.

WE WANT TO DO EVERYTHING WE CAN TO MAKE SURE IT'S IN THE BEST WORKING CONDITION.

>> THE CARRIER IS ONLY INSURING YOU FOR A ONE-YEAR PERIOD.

WHATEVER THEY'RE TRYING TO FIX, IF IT'S NOT FIXED IN THE YEAR PERIOD, THE INSURER IS STILL UNDERWRITING A RISK THAT HASN'T BEEN REPAIRED, RIGHT?

SO THEY'RE GOING TO -- THEY NEED TO -- THERE'S GOING TO BE -- JUST BECAUSE THEY HAVE IT IN THE PLANS TO FIX IT DOESN'T MEAN THAT IT'S LESSENED THE RISK AND THEY NEED TO CHARGE THE APPROPRIATE PREMIUM FOR THAT RISK.

>> Daryl: YOU KNOW, THAT BRINGS UP A WHOLE OTHER QUESTION FOR ME.

WHY IS IT THAT EVERYBODY IS ONLY INSURING FOR ONE YEAR AFTER THE NEXT YEAR AFTER THE NEXT YEAR?

I MEAN, I WOULD THINK THAT FOR THEM AND FOR ME -- WELL I -- YEAH, BUT I JUST -- WHY DO WE HAVE TO GO THROUGH THIS EVERY YEAR?

WHY CAN'T WE BUY INSURANCE COVERAGE FOR FIVE YEARS IF WE'RE A RELATIVELY NEW -- >> I THINK -- CAN I INTERJECT JUST A COMMENT?

FOR THE MASTER POLICY, IT'S AN ANNUAL REVIEW.

FOR THE HO6 POLICY, IT'S JUST -- IT JUST GETS RECIRCULATED SO EVERY YEAR YOU JUST GET THE BILL AND UNLESS THERE'S A CHANGE TO THE POLICY -- SO YOU DON'T HAVE TO RENEW OR GO BACK TO THEM BUT FOR THE MASTER POLICY FOR ASSOCIATIONS, YOU DO HAVE TO DO A REVIEW WITH YOUR AGENT AND WITH THE CARRIER USUALLY EACH YEAR.

>> Daryl: YEAH, I JUST FEEL LIKE FOR A VERY BIG BUILDING, NOTHING IS GOING TO CHANGE DRAMATICALLY IN ONE YEAR.

>> WELL!

>> LIKE THE BUILDING IN FLORIDA THAT FELL DOWN -- >> THAT WAS DUE TO A LOT OF DEFERRED MAINTENANCE AND STALLING.

THEY WERE PLANNING ON FIXING IT.

THEY DIDN'T GET TO IT BEFORE THE BUILDING COLLAPSED.

>> THAT WAS ONE OF THE SCARIEST THINGS I EVER SAW, ESPECIALLY IN A COASTAL COMMUNITY WITH GLOBAL WARMING.

>> LOTS OF SALT IN THE AIR.

>> Daryl: WE HAVE A QUESTION ON HOW MUCH YOU FOLKS THINK THAT THE CLIMATE CHANGE IS GOING TO BE AFFECTING INSURANCE THROUGHOUT THE WORLD.

ANYBODY WANT TO BITE ON THAT ONE?

I'LL MAKE YOU DO IT, ALEX.

>> I MEAN, I THINK KIND OF TO THE POINT YOU WERE MAKING EARLIER, IT'S KIND OF -- THE EVIDENCE IS IN THE AMOUNT OF CLAIMS THAT'S BEEN OCCURRING OVER THE LAST 10 YEARS.

I MEAN, PREVIOUS TO 2020, IF YOU LOOK AT THE NATIONAL AVERAGE IN THAT 10-YEAR PERIOD, IT WAS AROUND $40 BILLION ANNUALLY WITHIN THE U.S.

SINCE 2020, IT'S BEEN AT OR ABOVE $100 BILLION JUST IN THE U.S. ALONE.

WE'VE SEEN MORE OF THE UPTICK OF THE STORMS THAT HIT FLORIDA THAT'S CAUSING TENS AND BILLIONS OF DOLLARS.

IT'S EVIDENCE THAT THERE ARE MORE AND LARGER CLAIMS OCCURRING MORE FREQUENTLY.

>> Daryl: LOOKING AHEAD, THOUGH -- DO THEY LOOK AHEAD OR SAY, THIS HAS BEEN HAPPENING MORE AND MORE AND BOOM, HERE IS A NEW NUMBER.

IF IT GETS WORSE, JERRY?

>> YEAH, SO INSURERS, IF WE JUST FOCUS ON THE CAT RISK OR CATASTROPHIC RISK -- IN HAWAI'I OUR MAIN CATASTROPHIC RISK POTENTIAL IS HURRICANES.

THEY USE MODELING.

THE MODELING IS UPDATED ALL THE TIME TO TAKE INTO ACCOUNT.

THE INSURANCE, ALEX TOUCHED ON IT WELL, WE LOOK AT TWO COMPONENTS, FREQUENCY AND SEVERELY.

WE'VE BEEN OBVIOUSLY SEEING A GREAT NUMBER OF STORMS AND MORE SEVERE STORMS.

FORTUNATELY, KNOCK ON WOOD, IN HAWAI'I, WE'VE NOT BEEN DIRECTED DIRECTLY WITH A LARGE HURRICANE SINCE INIKI IN '92, BUT THE MODELS ARE STILL FORECASTING AND THERE'S STILL A SIGNIFICANT RISK THERE AND WE'RE DEFINITELY WORRIED ABOUT THAT.

>> Daryl: THIS IS A QUESTION FOR SCOT, UM, LYNN IN PEARL CITY, LIVE IN A TOWNHOUSE, RETIRED, RATES INCREASED PER MONTH.

HOW COULD THEY KEEP CHARGING HIGHER FEES?

WILL THIS CONTINUE?

IS THERE A SAFETY VALVE?

LIKE PROPERTY TAXES, IF YOU GET TO A CERTAIN AGE AND YOU COULD APPLY FOR A BREAK.

>> I HAVE A LOT OF SYMPATHY FOR THOSE INDIVIDUALS BECAUSE A LOT ARE ON FIXED INCOMES AND DON'T HAVE ANYWHERE ELSE TO TURN.

YOU DON'T LIVE IN A CONDO NECESSARILY BECAUSE YOU HATE SINGLE FAMILY HOMES.

YOU'RE LIVING IN A CONDO BECAUSE THAT'S THE AFFORDABLE OPTION.

THAT BEING SAID, A LOT OF THE PEOPLE ARE -- WE GET A LOT OF PEOPLE CALLING THE OFFICE ASKING FOR GOVERNMENT SUBSIDIES.

GOVERNMENT GRANTS.

GOVERNMENT MONEY.

I DON'T THINK THAT IT'S NECESSARILY APPROPRIATE RIGHT NOW FOR THE GOVERNMENT TO BE USING TAXPAYER DOLLARS TO FUND PRIVATE INDIVIDUALS' INSURANCE.

WHAT I'D LIKE THE GOVERNMENT TO DO INSTEAD TO HELP PEOPLE LIKE LINDA IS ALLOW THEM TO FIX THEIR CONDOS IN SUCH A WAY THAT THE INSURANCE WILL NATURALLY COME DOWN.

IT'S MORE OF A LONG-TERM SOLUTION.

I THINK IF WE GAVE PEOPLE $100 OR $200 OR $300 A MONTH TO SUBSIDIZE INSURANCE RATES, IT WON'T MAKE THE INSURANCE RATES GO DOWN.

THE PROBLEM WILL PERSIST OR EVEN GET WORSE.

THAT'S NOT THE SOLUTION.

I'D RATHER USE THE MONEY IF WE'RE GOING TO USE GOVERNMENT MONEY FOR LOANS TO CONDOS TO ACTUALLY HAVE THEM FIX THE DEFERRED MAINTENANCE FOR LONG-TERM SOLUTIONS SO THAT NOT ONLY LINDA BUT THE PERSON THAT WILL BE LIVING IN HER CONDO AFTER THAT AND THEN THE PERSON AFTER THAT WILL STILL HAVE A CONDO THAT'S IN GOOD STATE OF REPAIR AND WILL GET REASONABLE INSURANCE RATES.

>> Daryl: THIS IS A REALLY GOOD QUESTION.

NOW I UNDERSTAND IN QUESTION BETTER.

IT WAS ONE OF THE EARLIER QUESTIONS.

NOW I GET IT.

WHY DOESN'T THE STATE SELF-INSURE ALL OF THE HOMES IN HAWAI'I?

I MEAN, IF YOU LOOK AT THE -- I MEAN, YEAH, THE STATE WOULD HAVE TO BUY REINSURANCE.

WE DID IT BEFORE WITH HURRICANE.

YOU KNOW?

WHY NOT?

I MEAN, WOULD TAKING THE PROFIT MOTIVE OUT OF THIS?

AND WOULD THAT -- IS THAT A POSSIBLE SOLUTION?

YOU'RE LOOKING AT MISKEPTICALLY.

>> -- YOU'RE LOOKING AT ME SKEPTICALLY.

>> IT WOULD BE ASTRONOMICAL.

>> THE MONEY IS THERE.

PEOPLE ARE PAYING THE MONEY.

IT WOULD GO TO THE GOVERNMENT INSTEAD OF -- >> IT COULD WORK.

MAYBE WE NEED SOMEONE LIKE ALEX HERE TO SPEARHEED THAT AND JERRY.

>> IN CERTAIN CIRCUMSTANCES, LIKE IN CALIFORNIA, THAT'S THE STATE -- >> Daryl: HAS ANY OTHER STATE FIGURED THIS OUT?

TALK ABOUT CALIFORNIA.

THE ANSWER IS NO BUT HERE'S WHAT THEY'RE TRYING, RIGHT?

>> IT'S KIND OF THE PRINCIPLE OF THE INSURANCE WHICH IS ALL LARGE NUMBERS.

YOU HAVE TO HAVE A SPREAD OF RISK.

SO IF THE ENTIRE STATE IS ASSUMING THE ENTIRE RISK OF HAWAI'I AND THEY HAVE ALL OF THEIR EGGS IN ONE BASKET, ONE HURRICANE COMES AND IT'LL BASICALLY WIPE OUT THE ENTIRE AMOUNT OF MONEY WE'D HAVE IN ONE GO.

THAT'S WHY INSURANCE COMPANIES LIKE INSURING HERE IN HAWAI'I AND CALIFORNIA AND TEXAS BECAUSE THEY WANT THE SPREAD SO IF SOMETHING HAPPENS, IT DOESN'T COMPLETELY DRAIN THEM OF ALL THE RESERVES THEY HAVE TO PAY FOR A CLAIM.

>> Daryl: JERRY, JUST TO THROW THIS OUT, I MEAN, THERE IS AN AWFUL LOT OF MONEY FLOWING INTO INSURANCE IN HAWAI'I FOR -- I THINK THE GOVERNOR SITES REPEATEDLY THAT THE INSURANCE COMPANIES COLLECTED $36 BILLION OVER SOME PERIOD OF TIME AND ONLY PAID OUT LIKE $4.

>> $14.

>> Daryl: $14.

OK, YOU KNOW THE NUMBER.

SAY THAT BACK TO ME.

WHAT DO THE INSURANCE COMPANIES PAY OVER THOSE YEARS?

HOW MUCH DID THEY ACTUALLY PAY OUT IN LOSSES?

>> YEAH, SO SPECIFICALLY FOR THE PROPERTY AND CASUALTY MARKET OVER A 20-YEAR PERIOD, THEY DID COLLECT $36 BILLION IN PREMIUMS AND PAID OUT $14 BILLION IN CLAIMS.

OBVIOUSLY, THEY HAVE OPERATING EXPENSES LIKE ANY OTHER BUSINESS, RENT AND PAYING STAFF, PEOPLE TO COLLECT THOSE PRE PREMIUMS.

>> Daryl: 70%?

>> IT ACTUALLY IS QUITE HIGH.

ON THE INDUSTRY-WIDE -- NOW, HAWAI'I TENDS TO RUN A LITTLE MORE PROFITABLE THAN SOME OF THE OTHER AREAS.

SOME IS BECAUSE OF THE HURRICANE RISK AND US NOT HAVING TO PAY OUT HURRICANES ON THE PREMIUM SIDE.

BUT OVERALL, TYPICALLY AN INSURER WILL ACTUALLY ALMOST BREAK EVEN ON THAT PART OF THE EQUATION, BUT IT'S THE FUNDS THAT THEY CAN THEN INVEST AND SO IF THEY HAVE A PROFITABLE NET INVESTMENT INCOME, THAT'S KIND OF WHERE THEY CAN MAKE THEIR PROFITS BUT OVERALL, YOU'LL SEE IN THE PROPERTY AND CASUALTY MARKET WHAT WE CALL A LOSS RATIO OF AROUND 100%.

IN OTHER WORDS, THEY'RE ACTUALLY -- THERE ARE EXPENSES AND CLAIMS THAT ARE MATCHING UP WITH THEIR PREMIUMS.

IT'S ALMOST EVEN.

THEY'RE MAKING THE PROFIT OFF THE INVESTMENT INCOMES.

>> Daryl: GO AHEAD.

>> ONE OF THE THINGS WE'RE TALKING ABOUT A LOT IS REINSURANCE, TOO.

YOU'RE TALKING ABOUT OVERHEAD AND RENT AND THINGS LIKE THAT.

THAT DOES COST A LOT BUT REINSURANCE IS SUCH A HUGE CHUNK.

JERRY, DO YOU HAVE ANY INSIGHT INTO THAT?

>> IT HAS INCREASED QUITE A BIT.

BEFORE WHAT I HEARD IT WAS LIKE -- LIKE THE REINSURANCE COSTS WENT UP QUITE A BIT WHERE MAYBE IT WAS ABOUT 20% OF THE OVERALL CLAIMS AND EXPENSES AND NOW IT'S UP TO 40% OF THE OVERALL CLAIMS AND EXPENSES.

SO THAT REINSURANCE COST HAS AT LEAST DOUBLED.

>> BUT AS FAR AS THE AMOUNT OF PERCEIVED WINFALL THAT INSURANCE COMPANIES ARE GETTING, I MEAN, HOW MUCH OF THAT IS TAKEN UP BY THEIR ADMINISTRATIVE EXPENSE OF HAVING REINSURANCE SO THAT THEY CAN ISSUE POLICIES?

>> OH, SIGNIFICANT AMOUNT.

SO, YEAH, I'M NOT SAYING -- >> Daryl: WE'RE GETTING A LITTLE TECHNICAL.

WE'RE ALMOST DONE TO LET YOU GUYS KNOW, SO BUT I JUST WANT TO -- I LIKE THAT QUESTION, BECAUSE I THINK THE AVERAGE PERSON IS GOING, INSURANCE COMPANIES MAKE A RIDICULOUS AMOUNT OF MONEY AND THEY CHARGE US WHATEVER THEY WANT AND IT'S ALL OUT OF CONTROL.

THEY'RE FORCING OLD LADIES OUT OF THEIR APARTMENTS.

I MEAN, SCOT MATAYOSHI, I'M GOING TO PUT THAT TO YOU.

IS IT IMPOSSIBLE FOR THE STATE TO TAKE AT LEAST THE FRONT-FACING INSURANCE COMPANIES OUT OF THIS, BUY OUR OWN REINSURANCE AND STILL TAKE CARE OF OUR PEOPLE?

>> I THINK IT WOULD AGAIN RUN THE RISK OF BANKRUPTING OUR STATE IF A HURRICANE JUST SMASHED INTO ONE OF THE ISLANDS.

WE WOULD BE TAKING ON ALL OF THAT RISK.

NOW, WE CAN BUY REINSURANCE, BUT IN ORDER TO BUY ENOUGH REINSURANCE FOR THE ENTIRE STATE, THAT'LL BE AN INCREDIBLE SUM.

I THINK WHAT IT REALLY COMES DOWN TO IS DO YOU TRUST THE STATE TO DO SOMETHING LIKE THAT ON THAT LARGE OF A SCALE EFFICIENTLY?

I'M PART OF THE STATE AND I'M NOT SURE I CAN HONESTLY SAY YES TO THAT QUESTION, BUT THE STATE IS ENTERING THE MARKET BY, YOU KNOW, STANDING UP HHRF AGAIN OR A PORTION OF THE MARKET.

WE ARE STEPPING IN TO TRY TO MITIGATE SOME OF THOSE RISKS.

WE ARE STEPPING IN TO OFFER PEOPLE BASICALLY WHAT AMOUNTS TO A STATE-RUN INSURANCE OPP OPTION.

WE'RE JUST NOT TAKING THE ENTIRE MARKET AND ALL OF THAT RISK IN THAT MARKET UNTO OURSELVES BECAUSE WE CANNOT JUSTIFY RISKING THE STATE LIKE THAT.

>> Daryl: OK, WELL THANK YOU VERY MUCH.

VERY ENLIGHTENING SHOW.

I APPRECIATE IT.

MAHALO TO YOU FOLKS FOR JOINING US TONIGHT.

AND WE THANK OUR GUESTS... STATE HOUSE REPRESENTATIVE SCOT MATAYOSHI AND INSURANCE AGENT ALEX MCLAURY.

ACTING STATE INSURANCE COMMISSIONER JERRY BUMP AND WAIKIKI NEIGHBORHOOD BOARD MEMBER GREG MISAKIAN.

NEXT WEEK ON "INSIGHTS," FISH I THE CENTRAL INGREDIENT OF LOCAL.

BUT DO YOU KNOW WHERE THE RAW AHI USED IN POKE BOWLS OR SUSHI COMES FROM?

WE'LL TAKE A CLOSER LOOK AT THE PUSH TO IDENTIFY THE ORIGINS OF THE FISH WE EAT.

PLEASE JOIN US THEN.

I'M DARYL HUFF FOR "INSIGHTS" O PBS HAWAI'I.

ALOHA!

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