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Preparing for Hawaii's Next Hurricane

Climate change and major storms like Hurricane Sandy have implications for property insurance in Hawaii and around the world

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Climate Change and Hawaii

There is evidence that climate change has already started happening in Hawaii.

Recent research by the University of Hawaii-Manoa’s Geography Department reports an overall decline in Hawaii’s rainfall amounts and rain patterns consistent with climate change models, which suggest drought may worsen in the decades ahead. One report by UH researchers and another report published by scientists at NOAA and NASA describe how changing air and sea temperatures affect wind and rainfall in Hawaii and around the Pacific, all with implications that lead back to disaster insurance.

In addition, higher sea levels and coastal erosion will have a huge impact on coastal development in the state, where homes, hotels and other properties are valued at many billions of dollars.

Former Insurance Commissioner Linda Chu Takayama warns that the typical homeowner’s insurance policy does not include coverage for flood damage or wave surge. “You need to get a flood policy if you are in a potential inundation zone,” she says. “These are sold by regular insurance agents, but the insurer is the federal government.”

The federal flood-insurance program has been especially hard hit in recent years; the New York Times reported in November that the federal government’s flood insurance program incurred an $18 billion debt following Hurricane Katrina. Sandy’s hit could be $7 billion.

Allison Powers, executive director of the Hawaii Insurers Council, wonders: Does the federal government have the will to tell people they can’t rebuild where disasters are known to occur? “If people keep building in areas prone to damage, future losses are going to be more expensive.”

Costliest U.S. Hurricanes

Costliest U.S. hurricanes to the insurance industry since 1990 (all figures are based on 2012 dollars):

Katrina  2005, $47 million in insured losses*

Andrew  1992, $22 billion*

Sandy  2012, up to an estimated $22 billion**

Sources: * Insurance Information Institute; ** AIR Worldwide. Another company, Risk Management Solutions Inc., projects losses of $20 billion to $25 billion.

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Hawaii Business,March