The implementation of SB 1136 is expected to alter the existing landscape of homeowners' insurance in Hawaii, particularly for properties at risk of wildfires. By prohibiting insurers from basing their rates on past loss experiences, the bill aims to create a fairer system that can accommodate fluctuating wildfire risks while encouraging homeowners to mitigate such risks. The new regulations will also enhance coverage for additional living expenses, particularly during declared states of emergency, ensuring homeowners have support following disasters that result in property damage. Additionally, the bill stipulates a minimum duration of coverage for extra living expenses, providing a safety net for displaced homeowners.
Senate Bill 1136 introduces new regulations for insurance ratemaking, particularly focusing on how insurance rates can be affected by a property owner's wildfire risk. A significant feature of the bill is its mandate that insurers must provide documentation of any wildfire risk models they utilize and submit these models for approval to the insurance commissioner. This move aims to enhance transparency in how insurance premiums are calculated based on wildfire risk assessments. The bill particularly targets homeowners policies, and it stipulates that effective January 1, 2026, all new or renewed homeowners insurance must include coverage terms focusing on replacement cost value, which reflects the full cost of replacing a home without deductions for depreciation.
Discussions surrounding SB 1136 highlight points of contention, particularly from insurers concerned about the feasibility of adapting their ratemaking processes to comply with the evolving risk assessments. Insurers worry that the mandated changes—especially those related to wildfire risk calculations and the reliance on catastrophe modeling—may lead to increased overhead costs and potential conflicts in determining fair premiums. Proponents argue that these regulations will ultimately lead to a more responsive insurance market for homeowners facing the growing threat of wildfires, empowering them through clearer communication and access to risk information.