If you own a condominium in Hawaii or have been house-hunting in the islands lately, you may have noticed significant changes in insurance costs. According to industry reports, what’s happening in Hawaii’s condo market represents a substantial shift that some observers say is catching property owners off guard.
Data from industry sources indicate that condo associations across the state have experienced insurance premium increases of 300–400% compared to previous years. These cost increases appear to be directly affecting homeowners through higher maintenance fees and, according to some analysts, may be influencing property values.
So, what’s driving these dramatic spikes? A closer look reveals several underlying forces at play in Hawaii’s real estate market.
Understanding Contributing Factors
To understand current conditions, it may be helpful to examine 2023—a year that insurance industry professionals describe as particularly challenging. According to Sue Savio, President of Insurance Associates, last year presented unique challenges for the insurance sector.
Reports indicate that the United States experienced 28 major disaster events in 2023, compared to the typical 19-20 events usually recorded each year. These events were characterized by specific criteria: at least 25 fatalities, destruction of 2,000 or more homes, and damages reaching billions of dollars. The Lahaina fire on Maui was among these significant events.
It’s also noted that disasters occurring across the mainland could affect insurance rates in Hawaii due to how the insurance industry operates, with interconnected systems that extend beyond local markets.
The Role of Reinsurance in Premium Changes
Behind primary insurance companies, there exists another layer of insurers known as reinsurers. Industry experts describe these as companies that help spread risk across global markets in ways that may not be immediately visible to property owners.
Historical data suggests this system typically functions as follows: when a major disaster occurs (such as the Marco Polo fire, which reportedly cost $110 million), primary insurance carriers might pay a relatively small portion. In that case, reports indicate it was $4 million, with reinsurers covering the remainder.
Following 2023’s series of disasters, industry data shows that 27 out of the top 50 reinsurers globally reported losses. When these companies renew contracts (typically during January to March), there is evidence they have increased rates to insurance companies. These increases appear to affect consumers including Hawaii’s condo associations, hotels, hospitals, and property owners.
It’s worth noting that this pattern extends beyond Hawaii, with some analysts describing it as a global insurance market adjustment that may particularly impact island properties due to hurricane exposure considerations.
Insurance Coverage Challenges for Buildings
While reinsurance changes were occurring, another situation was developing more locally. Industry estimates suggest that as of Sept. 2024, 375-500 condominium buildings across Hawaii may have inadequate insurance coverage, particularly regarding hurricane protection. Although some of these problems have reduced in 2025, this situation appears to have developed through a number of market consolidation and risk management decisions.
Reports indicate the situation began when Fireman’s Fund, described as one of the major carriers for high-rise buildings, reviewed their portfolio and found 80% of their hurricane exposure concentrated in Hawaii. From a risk management perspective, some analysts viewed this as concentrated exposure.
The company’s response reportedly included initially capping coverage at $25 million per building, then reducing it to $10 million. Given that Hawaii has three carriers willing to write high-rise condo policies (First Insurance, Fireman’s Fund, and DB), this reduction in available coverage appears to have created limitations.
Following the Lahaina fire, supplemental hurricane insurance costs reportedly increased significantly due to reinsurance factors. Many condo boards, having established annual budgets, faced difficult decisions. Some reportedly used reserves as a temporary measure, while others chose to maintain current coverage levels, planning to address gaps in subsequent years.
Financing Considerations Related to Insurance Coverage
Insurance coverage levels appear to affect potential buyers’ financing options and costs. Anders Helli, Regional Manager at Guaranteed Rate Mortgage, has observed how insurance coverage levels can create financing challenges.
Industry reports suggest that conventional lenders like Fannie Mae and Freddie Mac require adequate hurricane coverage for loan approval. This appears to be a firm requirement that may not be waived based on other factors such as credit scores or down payments.
The financial implications appear to be measurable. For buildings with adequate insurance coverage, buyers may typically secure conventional financing at approximately 6.5% interest rates. However, for buildings with coverage gaps, alternative financing options reportedly run 7.5% to 7.75%, representing a premium of a full percentage point or more.
These alternative loans typically involve an additional 1% in points, meaning higher upfront costs. Based on calculations for a $1 million loan, this could represent an extra $840 per month in payments, potentially adding hundreds of thousands of dollars over a 30-year mortgage term.
This financing situation may create a cycle where buildings with coverage gaps become more challenging to sell, which could affect property values and make insurance coverage investments more difficult to justify.
Considerations for Potential Condo Buyers
Given these market conditions, prospective buyers might consider several factors during their property search process.
Insurance Documentation Review
The association’s insurance summary warrants careful examination beyond a basic review. Key areas to consider include the property coverage amount relative to the building’s replacement cost, hurricane coverage limits and deductibles (typically set at 1% of the building’s total value).
Important questions might include: does the building have supplemental hurricane insurance to reach full coverage? This could affect financing options. Building ordinance coverage, which helps cover costs of bringing a building up to current codes after major damage, has become increasingly relevant as building codes have evolved.
Maintenance Considerations
Beyond insurance, maintenance status may significantly impact financing options. The 2021 Surfside condo collapse in Florida appears to have influenced lending industry guidelines regarding structural issues.
Buildings with significant spalling, walkway deterioration, or other major maintenance issues may face conventional financing limitations, regardless of insurance status. When evaluating potential purchases, buildings with proactive maintenance plans and adequate reserves might be preferable. Buildings that have deferred major repairs could present both safety and financing considerations that might affect purchase options or future resale value.
Potential Market Developments
While current conditions may seem challenging, some industry indicators suggest possible changes ahead.
Sue Savio has noted what appears to be a slight softening in hurricane insurance rates, running approximately 2-4% lower than mid-2023 levels. Additionally, the relatively quiet recent hurricane season could potentially lead to rate decreases of 10-15% in the coming year. Insurance markets historically adjust when claims experience improves, and calm hurricane seasons could provide market relief.
The experiences of recent years appear to have influenced condo associations’ approaches. More boards reportedly are budgeting appropriately for insurance costs from the outset, which could result in more fully insured buildings throughout 2025. Some associations are reportedly combining coverage from multiple carriers to reach full coverage thresholds, though this approach requires managing multiple insurer relationships.
For buildings facing major maintenance challenges, the C-PACER loan program, recently passed by the state legislature, offers 30-year financing for structural repairs, plumbing upgrades, sprinkler systems, and elevator improvements. This program’s structure allows payments to be added to property taxes and transfer to new owners, potentially making it easier for associations to address significant maintenance items without large special assessments.
Navigating Current Market Conditions
Current and prospective condo owners in Hawaii’s market might consider several approaches.
For Current Owners
Some experts suggest that current condo owners become actively involved in understanding their building’s situation. This might include reviewing association insurance coverage carefully and understanding coverage details. Regular attendance at board meetings could help owners stay informed about insurance decisions and budget planning beyond crisis situations.
There may be value in preparing mentally and financially for potential maintenance fee increases as associations adjust to current cost realities. It could also be worth considering the long-term implications of decisions to defer maintenance or reduce insurance coverage, as short-term cost savings might create more expensive future problems.
For Prospective Buyers
Those considering Hawaii condo purchases might find their due diligence process has expanded, though this research appears increasingly important. Requesting building insurance summaries and verifying hurricane coverage before proceeding too far in the process could be valuable. Inquiring about recent or planned maintenance fee increases might provide useful information; buildings that haven’t raised fees recently might warrant additional investigation rather than being viewed as simply advantageous.
Checking whether buildings qualify for conventional financing before becoming attached to specific units could prevent disappointment. Perhaps most importantly, considering total ownership costs, including potentially higher insurance costs that may persist for the foreseeable future, could inform decision-making.
This information is provided for educational purposes and should not be considered as financial, legal, or insurance advice. Individual situations may vary, and professional consultation is recommended for specific decisions.
This summary was partially generated and may include minor variations from source materials.
Sources:
- Luxury Homes International, “Hawaii’s Insurance Crisis with Sue Savio – 300%‑400% Increases in Insurance & Maintenance Fees??,” YouTube video, published August 2024, accessed May 22 2025Janis Magin Meierdiercks, “Insurance Crisis Worsens in Hawai‘i’s ‘Condoland’,” Hawaii Business Magazine, June 21 2024.
- Janis Magin Meierdiercks, “Hawai‘i’s Condo Insurance Crisis Is Now Hurting Sales,” Hawaii Business Magazine, August 28 2024.
- NOAA National Centers for Environmental Information, “U.S. Billion‑Dollar Weather and Climate Disasters,” 2023 summary, accessed May 22 2025.
- Reuters, “U.S. Property Reinsurance Rates Rise by Up to 30% on Jan. 1 – Broker Says,” January 2 2024.
- Hawai‘i Department of Commerce & Consumer Affairs, “Governor Green Signs Emergency Proclamation to Address Condo Insurance Crisis,” August 7 2024.
