Lahilahi Heen has lived for decades in a three-bedroom house surrounded by a carefully groomed garden in the lush Hawaiian Shores subdivision in Lower Puna. It’s also downslope from Hawaii’s most active volcano.

Her house sits outside Pahoa Village in an area that was threatened by a lava flow from Kilauea volcano in 2014. The lava never reached her neighborhood, but the danger is ever-present and she now faces a new risk.

The price of her homeowner’s insurance soared from $1,500 in 2022 to $5,000 the next year. Heen couldn’t afford that, she said, so she took a risk. She scraped together $30,000 in mostly borrowed money to pay off her mortgage, so she could go without insurance.

“It was super, super stressful. I learned new swear words,” she said, recalling that decision.

Heen is one of thousands of Big Island residents coping with a dire shortage of inexpensive insurance in sprawling subdivisions built generations ago in the two most hazardous lava zones.

Those areas offer some of the most affordable housing in Hawaii. The median home price in Pahoa — the largest town in Puna — is about $360,000. But private insurers have almost entirely abandoned Lava Zones 1 and 2 because they were deemed too risky to cover.

That means for many homeowners there the only coverage available is offered by the Hawaii Property Insurance Association, which was created by the state in 1991 to insure homes in the lava zones. But HPIA coverage has become so expensive that people in the lava zones are canceling their policies or putting their homes up for sale.

More On Puna: Why people flock to this volcanic area despite the risk

The insurance crisis in the lava zones could happen to other Hawaii homeowners as more dramatic impacts from climate change take hold across the state. Lawmakers are concerned that more private insurers may pull out and are preparing mechanisms to deal with that.

Earlier this year legislators considered bills to make coverage through HIPA and the Hawaii Hurricane Relief Fund available to homeowners who can’t obtain insurance through the private market if that becomes necessary.

But experts say little can be done about the escalating cost of coverage in areas such as the lava zones, where private coverage is unavailable.

‘They’re Just Going Without’

In the 1950s and 1960s, county officials allowed developers to chop up thousands of acres in high-risk lava zones and sell the land off as house lots with minimal infrastructure. In recent decades thousands of people have moved into those areas in large part because they offer cheaper housing in a state with one of the highest costs of living in the nation.

Puna, which at about 500 square miles is roughly the size of Oahu, was the site of an eruption in 2018 in Leilani destroyed more than 600 homes, beginning the exodus of private insurers and a reliance on the Hawaii Property Insurance Association.

Andrea Rosanoff and her husband, Steven Sparks, have lived since 2003 in a home they built themselves in the jungle in Leilani Estates, a subdivision on Kilauea’s East Rift Zone.

They pay $5,900 per year for the maximum available $350,000 in coverage. That is a huge strain for a couple living on social security benefits, but they are determined to stay put.

Some of their neighbors have been forced to make hard choices.

“What’s happening is people who own their homes — many of them retired schoolteachers, retired nurses and so on who own their homes — many of them are just not buying insurance. They’re just going without,” Rosanoff said.

Other homeowners are paying for a year of insurance at the new, high rates to buy time so they can sell out, Rosanoff said. “It’s kind of decimating the homeowners of this very affordable area,” she said.

State House Vice Speaker Greggor Ilagan, who represents the area, proposed several measures during the session earlier this year. Two bills that called for capping insurance premiums and imposing a moratorium on foreclosures in the lava zones never got a hearing.

Another bill aimed at creating a pool of funding to subsidize insurance premiums for the lava zones also quietly died.

Ilagan’s pitch is essentially that the state should intervene to help lower income people who are in danger of being forced out of their homes, especially older adults on fixed incomes. That may include subsidizing premiums.

Some firmly disagree. Alison Ueoka, president of the Hawaii Insurers Council, said insurance prices should reflect the risk, and the lava zones are quite risky.

In fact, the Hawaii Property Insurance Association would like to raise rates even higher, she said. HPIA did not respond to a phone call seeking comment.

“If the state is going to choose to subsidize people who choose to live in the lava zones, I would imagine that everybody else would have their hand out for some subsidy as well,” Ueoka said. “What makes them more special than anybody else? I mean, they already got a cheaper price on the home.”

Lava zone homeowners may be low-income residents, but “there are poor folks everywhere,” she said. The nonprofit insurers council represents about 40% of the property and casualty carriers operating in Hawaii.

Beyond The Lava Zones

Ilagan contends that Hawaii lawmakers need to look beyond the lava zones to also consider similar problems that condominiums are having with insurance on Oahu, as well as the difficulties property owners in coastal areas such as Oahu’s North Shore are have obtaining affordable coverage.

“We have an insurance problem all throughout the state, and the solution has to be comprehensive,” rather than treated simply as a Big Island issue, he said.

People live in lava zones for the same reason they move into Oahu condos without fire sprinklers — because it is an affordable way to live in Hawaii, he said.

Rosanoff has been working to establish a nonprofit organization to help push for a solution but progress has been slow. She believes that the issue “is an opportunity for us to think in new ways.”

Rosanoff sees the situation in Lava Zones 1 and 2 as a warning to the rest of the state because homeowners elsewhere may soon confront the same insurance price squeeze.

“These natural disasters, the hurricanes and climate change, this is our future,” she said. “Let’s get real.”

She wants the state to step in as a provider of reinsurance, coverage that insurance companies including HPIA buy to spread the risk and guard against catastrophic losses.

“That might provide some real long-term relief,” she said.

The price of reinsurance also has dramatically increased in recent years, fueled in part by losses from global disasters.

Ilagan also introduced a bill to establish a working group to study the possibilities for establishing some sort of state-backed reinsurance program, but that measure died in the state Senate after passing in the House.

Insurers Of ‘Last Resort’

Still, Hawaii’s insurance problems are getting top-level attention.

A measure to try to stabilize Hawaii’s condominium insurance market died at the Legislature this year, but Gov. Josh Green issued an emergency proclamation in August to temporarily authorize the Hawaii Hurricane Relief Fund and HPIA to provide coverage to condo associations.

That proclamation also establishes a joint executive and legislative task force to monitor the insurance market, implement short-term fixes and recommend emergency changes.

Senate Commerce and Consumer Protection Committee Chairman Jarrett Keohokalole said lawmakers and the Green administration are seeking ways “to provide that same type of last resort insurance (as HPIA) to property owners across the state in case more insurers leave the market, and there are no commercial options available.”

Lawmakers also are looking to reactivate the Hawaii Hurricane Relief Fund program with a new board of directors to prepare it to once again offer hurricane policies if that becomes necessary, he said. The HHRF program has not issued policies in more than 20 years.

But all of that activity will not solve the insurance problems in the lava zones, including many who rely on the Hawaii Property Insurance Association.

Keohokalole said that shows that HPIA is doing its job.

“The state fix is working in Puna, and it’s to provide an insurance policy of last resort when there are no commercial options available,” he said, adding the expense comes from the need to cover operational costs, including buying reinsurance.

“The premiums are high because this state last resort program still needs to be financially viable,” he said.

Keohokalole said global reinsurers have lost $100 billion a year for five years running because of disasters around the nation and the world, and they are recalculating their risks and raising their rates. That helps fuel the escalating cost of HPIA coverage in the lava zones.

As for subsidizing coverage in the lava zones, Keohokalole said, “I think we would have to see in this coming Legislature whether the taxpayers from across the state would like to subsidize residents living in the lava zone.”

“I think the harder question is, if we’re going to subsidize insurance rates, what kind of a precedent does that set, and how much is it going to cost us?” he asked. “It’s unclear because of all of those insurance market dynamics.”

Industry Concerns

Ueoka, the Hawaii Insurers Council president, said HPIA actually amounts to a burden on the private insurance industry because private insurers could be slapped with assessments to support HPIA if it ever runs out of money.

HPIA is the Hawaii version of what is known as a Fair Access to Insurance Requirements Plan, a state-mandated program to provide coverage to people and businesses that cannot buy coverage on the regular market.

When FAIR plans suffer losses that exceed their reserves and reinsurance limits, that can trigger assessments on private insurers in that market to help cover the loss. The specter of those potential assessments can cause insurers to reduce business in a market or even withdraw entirely from that market, Ueoka said.

Despite those concerns, the Hawaii Insurers Council supported a bill this year to expand the reach of HPIA to take on more risk such as condominiums because “HIC is looking at statewide solutions,” she said.

The insurers council is also participating in working groups to prepare legislation for next year that would position the hurricane relief fund and HPIA to provide coverage as necessary.

‘Everybody’s Scrambling’

Heen, a 64-year-old bank teller, said her old insurance company, Universal Property & Casualty, canceled her coverage when it left the Hawaii market. She worried that her bank would force her to buy even more expensive insurance or possibly even try to take her home if she went without.

So she paid HPIA about $5,000 for one year of coverage with money that was given to her as a gift, then dropped that policy once she paid off her mortgage.

She said she would like to buy coverage to insure her Hawaiian Shores home against hurricane damage, at least, but needs to save up for a while.

She met one woman who said she was losing her home because she can’t pay her bills, and has talked with others who are urgently searching for cheaper housing because their landlords raised the rent to cover their insurance costs.

“Everybody’s scrambling for the same lower rent, or the possibility of lower rent,” Heen said.