RELATING TO INSURANCE FOR HAWAII CONDOMINIUM PROPERTIES.

HB590

HOUSE OF REPRESENTATIVES

H.B. NO.

590

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

RELATING
TO INSURANCE for hawaii condominium properties
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

PART I

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SECTION 1.
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The legislature finds that, before the Maui wildfires on August 8, 2023,
the availability of condominium building master property insurance policy
options within the condominium insurance marketplace was shrinking.
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Due in part to this shrinking, the cost of
condominium building master insurance policies has increased exponentially,
with insurers increasing deductible amounts from approximately $10,000 to
$25,000 per unit, per occurrence, to as much as $250,000.

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The legislature also finds that while the
State has not experienced a direct major impact from a major hurricane since
hurricane Iniki devastated Kauai and damaged homes along Oahu's leeward coast
more than thirty years ago, mortgage lenders continue to require Hawaii
homeowners to carry hurricane insurance, which can cost two to three times the
amount of annual premiums of a conventional homeowner policy.
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The governor's emergency proclamation dated
August 7, 2024, and updated on October 7, 2024, enabled the executive branch to
provide additional options for condominium associations to purchase hurricane
and property insurance for their buildings by authorizing:

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(1)
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Loans
to the Hawaii hurricane relief fund and the Hawaii property insurance
association to facilitate the issuance of hurricane and property insurance
policies to condominium associations; and

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(2)
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The
Hawaii hurricane relief fund to issue hurricane insurance policies for large
condominium buildings, and to set policy limits.

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The legislature acknowledges that although
insurance coverage, excluding hurricane coverage, for condominium buildings is
available in the standard insurance market, the availability of this coverage
is not guaranteed.
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The city and county
of Honolulu's requirement for mandatory fire sprinkler retrofits or alternative
fire safety upgrades in older condominium properties that are subject to
ordinance 18-14, as amended by ordinance 22-2, has resulted in higher insurance
premiums and expenses for more than three hundred high-rise properties that are
subject to that ordinance.

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The purpose of this part is to require
property insurers to offer specific discounts to condominium associations that
undertake risk mitigation strategies that improve building safety and resilience
by reducing the likelihood of significant damage and subsequent insurance claims.

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SECTION 2.
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Chapter 431, Hawaii Revised Statutes, is amended by adding a new part to
article 10E to be appropriately designated and to read as follows:

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Part
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CONDOMINIUMS;
discounts for risk mitigation upgrades

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�431:10E-A
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Definitions.
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As used in this part:

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"Association" has the same
meaning as in section 514B-3.

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"Condominium" has the same
meaning as in section 514B-3.

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"Property insurer" means any
entity providing property insurance in the State under this chapter.

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�431:10E-B
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Insurance premiums; discounts for risk
mitigation upgrades, strategies, and plans.
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Each property insurer that provides property insurance to an association
pursuant to section 514B‑143(a)(1) shall offer discounts on the
association's annual insurance premium if the association adopts the following
risk mitigation upgrades:

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(1)
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For
the following disaster-resiliency upgrades, a discount equal to:

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(A)
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$ for
the
installation of impact‑resistant windows;

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(B)
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$ for
the installation of flood barriers and sandbags;

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(C)
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$ for
the installation of drainage improvements and waterproofing of building
foundations;

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(D)
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$ for
the use of fire-resistant materials;

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(E)
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$ for
the installation of sprinkler systems;

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(F)
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$ for
the creation of defensible space between the building and surrounding areas;
and

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(G)
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$ for
seismic safety improvements;

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(2)
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For
the following planned maintenance improvements, a discount equal to:

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(A)
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$ for
the implementation of annual structural inspections;

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(B)
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$ for
the implementation of annual roof maintenance;

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(C)
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$ for
the implementation of annual sealing and waterproofing maintenance;

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(D)
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$ for
the implementation of annual heating, ventilation, and air conditioning
maintenance;

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(E)
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$ for
the implementation of annual plumbing maintenance; and

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(F)
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$ for
the implementation of annual fire and safety system maintenance, including
maintenance and testing of fire extinguishers, alarm systems, and elevator
safety; and

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(3)
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For
the adoption of the following smart building technologies that enhance the
building's resilience by providing real-time monitoring, a discount equal to:

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(A)
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$ for
the installation of leak detection sensors;

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(B)
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$ for
the installation of wind and seismic sensors;

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(C)
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$ for
the installation of smart smoke alarms that are connected to a central
monitoring system;

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(D)
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$ for
the installation of automated sprinkler systems;

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(E)
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$ for
the installation of energy management and heating, ventilation, and air
conditioning monitoring systems;

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(F)
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$ for
the installation of security systems that utilize smart building technologies; and

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(G)
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$ for
the installation of building health monitoring systems.

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�431:10E-C
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Insurance premiums; discounts; disaster
response plans.
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Each property
insurer that provides property insurance to an association pursuant to section
514B‑143(a)(1) shall offer a discount on the association's annual
insurance premium equal to $ if
the association develops a comprehensive disaster response plan to minimize
losses and claims in an emergency.

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�431:10E-D
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Rules.
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The commissioner shall adopt rules pursuant to chapter 91 necessary to
implement this part, including rules that specify the requirements that an
association must meet to qualify for the discounts specified in sections
431:10E-B and 431:10E-C."

PART II

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SECTION 3.
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The legislature finds that condominium
properties on Oahu that have completed and filed life safety evaluations and
installed fire safety upgrades or are in the process of actively pursuing the
recommendations in the life safety evaluation report, as evidenced by the
hiring of a licensed design professional and active pursuit of a permit for the
improvements, should receive justifiable insurance premium adjustments based on
their proactive risk‑reduction efforts.

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Accordingly,
the purpose of this part is to regulate insurance premium increases for
condominium properties that have undertaken life safety evaluations and are
installing or have installed fire safety upgrades.

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SECTION 4.
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Chapter 431, Hawaii Revised Statutes, is amended by adding a new part to
article 10E to be appropriately designated and to read as follows:

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Part
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INSURANCE
PREMIUM INCREASES

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�431:10E-AA
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Definitions.
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As used in this part:

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"Condominium" has the same
meaning as in section 514B-3.

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"Condominium
that has received or is actively pursuing an acceptable score on a building
fire and life safety evaluation" means a condominium:

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(1)
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Located in a county that has adopted an
ordinance that amends the state fire code by:

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(A)
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Authorizing the use of fire prevention and
fire safety systems as an alternative to the use of an approved automatic
sprinkler system; and

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(B)
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Requiring the condominium to receive an
acceptable score on a building fire and life safety evaluation for the
alternative to the required use of an approved automatic sprinkler system; and

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(2)
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That
has either:

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(A)
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Received
and is currently maintaining an acceptable score on a building fire and life
safety evaluation for the alternative to the required use of an approved
automatic sprinkler system; or

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(B)
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Completed
a building fire and life safety evaluation for the alternative to the required
use of an approved automatic sprinkler system and:

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(i)
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Is actively pursuing the recommendations of the evaluation by
hiring a licensed design professional;

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(ii)
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Is actively pursuing a permit for the improvements; and

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(iii)
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Will complete the improvements by the beginning of the next property
insurance policy period.

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"Premium increase" means any
upward adjustment in the insurance premiums charged by a property insurer for
coverage on a condominium property.

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"Property insurer" means any
entity providing property insurance in the State under this chapter.

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431:10E-
BB
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Insurance premium adjustment.
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(a)
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Any
property insurance premium increase applicable to a condominium shall be:

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(1)
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Based
on actuarial justifications that reflect actual risk reduction resulting from
upgraded fire safety improvements installed in conjunction with a building fire
and life safety evaluation; and

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(2)
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Accompanied
by a detailed written explanation, including actuarial data and risk
assessments supporting the increase.

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(b)
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No property insurance premium applicable to a condominium that has
received or is actively pursuing an acceptable score on a building fire and
life safety evaluation shall be increased by more than ten per cent from the
previous year unless the property insurer demonstrates, through independently
verified data, that an amount in excess of ten per cent is necessary due to
external factors, including natural disaster risk assessments or market‑wide
claims experience.

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431:10E-CC
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Filing and oversight requirements.
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(a)
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Each condominium property insurer shall file
an annual report with the commissioner detailing and providing justification
for all condominium premium increases, including but not limited to:

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(1)
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Any
actuarial data used to justify a premium increase; and

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(2)
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A
summary of any predictive modeling tools and techniques, including catastrophe
modeling, used to justify a premium increase; provided that the summary shall
include a description of each modeling tool or technique, the results of the
modeling done using the tool or technique, and an explanation of why those
results justify a premium increase.

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(b)
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If a property insurer believes that any portion of the report filed
pursuant to subsection (a) includes proprietary information that should be
withheld from disclosure as confidential, then the property insurer shall
inform the commissioner in writing and provide justification to support the
property insurer's claim.

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(c)
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The
commissioner shall review the information submitted pursuant to subsection (b) and
determine whether the information should be withheld from disclosure as
confidential.
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The commissioner's
decision shall be final.
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If the
commissioner determines that the information is confidential, the information
shall be exempt from public disclosure to the extent permitted by chapter 92F.

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(d)
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The commissioner shall make all reports available to the public on the
insurance division's website; provided that any portion of the report deemed
confidential pursuant to subsection (c) shall not be disclosed.

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(e)
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The commissioner shall review property insurer filings to ensure
compliance with this part and investigate complaints of unjustified premium
increases.

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431:10E-DD
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Penalties.
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(a)
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Any property insurer that imposes a premium
increase in violation of section 431:10E-BB shall:

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(1)
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Be
subject to a fine of up to $10,000 per violation; and

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(2)
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Refund
excessive increases in premium payments.

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(b)
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The commissioner may suspend or revoke the license to operate in Hawaii
of any property insurer that commits five or more violations of this part
within a ten-year period."

PART III

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SECTION 5.
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If any provision of this Act, or the application thereof to any person
or circumstance, is held invalid, the invalidity does not affect other
provisions or applications of the Act that can be given effect without the
invalid provision or application, and to this end the provisions of this Act
are severable.

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SECTION 6.
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In codifying the new sections added by sections 2 and 4 of this Act, the
revisor of statutes shall substitute appropriate section numbers for the
letters used in designating the new sections in this Act.

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SECTION 7.
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This Act shall take effect on July 1, 2025.

INTRODUCED BY:

_____________________________

Report Title:

Condominiums;
Property Insurance; Insurance Premiums; Discounts; Risk Mitigation Upgrades;
Disaster Response Plans; Fire and Life Safety Evaluation

Description:

Requires property
insurers to offer discounts on a condominium association's annual insurance
premium if the association adopts specific risk mitigation upgrades or develops
comprehensive disaster response plans.
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Requires property insurers of condominiums to base premium increases on
actuarial justifications that reflect actual risk reduction resulting from
upgraded fire safety improvements installed in conjunction with a building fire
and life safety evaluation.
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Requires
property insurers of condominiums to justify premium increases above 10%.
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Requires property insurers of condominiums to
publicly report premium increases each year.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.