HONOLULU (AP) — Nearly 14,000 federally subsidized flood insurance policies in Hawaii will start to see premium increases as Congress looks to get a federal program out of a $24 billion hole.
Legislation signed by President Barack Obama on Friday means homeowners won’t see premiums jump all at once as scheduled under a 2012 overhaul.
But the relief law calls for insurance rates for owner-occupied homes to increase by up to 18 percent annually, while businesses and second homes will see hikes of 25 percent a year.
On Hawaii’s island of Oahu, home to the World Cup of Surfing, more than 8,000 policyholders face the hefty premium increases.
The hikes would mostly impact homeowners on Oahu’s North Shore, where legendary waves make the coastline a mecca for surfers. But for anyone who wants a coveted piece of ocean-front property, insurance is bound to be getting more expensive.
“I just had a conversation with a buyer who wanted to buy on the North Shore, and he was really worried about the increases,” said Cathy Possedi, a Honolulu-based real estate agent tor with Hawaii Life Real Estate Brokers. “Eventually you’re going to pay for it.”
Under the new law, someone with a Hawaii vacation home paying $1,200 per year now for flood insurance would be paying $3,600 in five years and over $11,000 in 10, until they drop their subsidy and pay a rate based on the real flooding risk.
“You can imagine what it must be like for a homeowner who’s owned their home for 10 years,” said Ivy Costa, an insurance agent with Liberty Mutual.
Before the relief law was signed, a homeowner in Haeiwa was shocked to find out his insurance rate, which had been $1,200 a year, would rise to as much as $47,000 a year, Costa said. Costa told the homeowner the new rate, and then didn’t hear from him again. Another in Kailua was faced with a potential increase from $700 to $30,000 per year.
Howls of protests about such immediate increases led to the relief law that put the brakes on the 2012 overhaul that was supposed to end costly government subsidies under the National Flood Insurance Program.
A series of islands in the middle of the Pacific, Hawaii is particularly vulnerable, and some of the most desirable – and expensive – oceanfront properties are at the highest risk of flooding.
In December, the ocean chipped away at some of the multimillion dollar homes that line Sunset Beach, taking a deck here and a bedroom there as its waves pounded away.
On Oahu, 22 percent of policyholders face premium increases, and on the Big Island, 36 percent of policyholders could see a hike.
“Some people just can’t afford to pay $20 grand in an insurance policy, so they’re going to sell their house,” Possedi said. “And who’s going to buy it? … lt’s a negative chain reaction.”