Waikīkī Condo Insurance in 2025: HO-6, Hurricane, Flood, and AOAO Master Policies

Hawaii’s condominium insurance market is experiencing unprecedented volatility. Over the past two years, many condo associations and unit owners have faced soaring insurance premiums, reduced coverage, and even difficulty obtaining certain policies. The root causes trace back to a series of disasters and market shifts – both globally and locally – that have made insurers reevaluate risks in Hawaii. This article explains the current state of condo insurance for prospective Waikīkī condo buyers, covering the different policy types (HO-6 unit owner insurance, hurricane and flood coverage, and AOAO master policies), how the crisis arose, how condo boards are coping, and what solutions are being pursued.

Root Causes of Hawaii’s Condo Insurance Instability

Hawaii's insurance woes began mounting even before the 2023 Maui wildfires. In recent years, record catastrophe losses worldwide have “hardened” the insurance market, driving up costs for coverage everywhere. Insurers rely on global reinsurance (insurance for insurance companies) to spread risk, but reinsurance costs have been surging 20%–50% annually, largely due to frequent billion-dollar disasters around the world. This trend was already pushing Hawaii condo insurance premiums up by 2021–2022, and then the August 2023 Lahaina wildfire put Hawaii on the radar as a high-risk area. The Maui fire – which caused an estimated $3+ billion in insured losses – underscored the islands’ unique vulnerabilities (from wildfires to hurricanes) and made some insurers more wary of writing policies in Hawaii.

The result has been a sharp spike in insurance rates and a pullback in coverage availability. Condo associations saw premiums double, triple, or worse within a year. In many cases, insurance companies also introduced “sublimits” on certain hazards – especially hurricane wind coverage – far below a building’s full replacement value. For example, one major carrier in early 2023 stopped offering full hurricane coverage for Hawaii condos, capping its coverage at around 10–30% of a property’s value. This left condo boards scrambling to find other insurers (often at much higher cost) to cover the remaining 70–90% needed for hurricane protection. In practical terms, a high-rise in Kakaʻako with a $300 million replacement cost might get only $10 million of hurricane coverage from the primary insurer, forcing the association to seek $290 million in additional coverage from specialty insurers. Those excess “layers” of hurricane insurance can cost on the order of $800,000 to $1,000,000 per year for one building.

Waikīkī’s skyline is dense with high-rise condos, many built decades ago. Recent insurance market turmoil has hit older Hawaii condo buildings particularly hard. Premiums for some Honolulu condominium towers have jumped 300%–600% in one year, and a few extreme cases saw increases up to 900% or even 1,300%. Hawaii’s Insurance Commissioner noted that condo insurance rates statewide have skyrocketed as a result of the “hardening” global market and recent catastrophes. The Maui fires in particular “highlighted these issues for our state, leading to skyrocketing insurance rates for condos, some increasing by as much as 1,000%” according to Governor Josh Green. In short, disasters from California to Florida to Lahaina have made insurers significantly raise prices and limit coverage for properties in Hawaii. Climate change is also a factor: rising sea levels, more intense wildfires, and Pacific hurricanes have heightened perceived risks for coastal and island communities. All these pressures have fed into Hawaii’s current condo insurance crunch, where insurance is not only far more expensive but, in the case of hurricane coverage, sometimes hard to secure at any price.

AOAO Master Policies – Surging Costs and Coverage Gaps

For condo buyers, it’s critical to understand the role of the Association of Apartment Owners (AOAO) master insurance policy. The AOAO master policy is the insurance carried by the condo association on the entire building structure and common areas, covering things like the roof, exterior walls, elevators, lobbies, and the overall replacement cost of the property. This master policy typically includes hazard insurance (fire, wind, etc.), liability coverage for common areas, and often a separate hurricane insurance component (either as part of the policy or a standalone hurricane policy). It may also include flood insurance if the building is in a flood zone (more on flood coverage later).

The recent instability has severely impacted these master policies. Hawaii’s condo associations have been hit with unprecedented premium increases for their master insurance – often several times higher than the previous year. Elaine Panlilio, an insurance manager in Honolulu, noted that over the past year most condo AOAOs saw annual premiums jump 300% to 600%, and a few faced 10- to 14-fold increases. Such spikes can add hundreds of thousands of dollars in new costs that the building must somehow pay.

At the same time, insurers have tightened their coverage limits, especially for hurricane damage. There are only a handful of insurers in Hawaii that write standard condo building policies, and one of the largest (Allianz) announced it would no longer insure the full replacement value for hurricane losses. Instead it set a fixed maximum payout (for example, $10 million per building for hurricane damage). This effectively imposes a hurricane sublimit well below what a high-rise might need if a direct hit occurred. Other major insurers have become more selective: State Farm, for instance, hasn’t issued a new condo policy in Hawaii since Hurricane Iniki in 1992 (though it continues renewing existing policies). Another carrier, DB Insurance, has reportedly declined to renew some condo policies based on location or building condition. With only three or four main insurers in the market, any cutback by one leaves dozens of buildings scrambling for alternatives.

As a consequence, many Waikīkī and Honolulu condos have become “underinsured.” Industry experts estimate roughly 400 condominium projects in Hawaii are currently carrying less than 100% of their full replacement insurance. In other words, the master policy’s coverage limit wouldn’t be sufficient to rebuild the property completely if a disaster struck. This is a risky scenario: if a condo tower is, say, only 50% insured, a major hurricane or fire could leave a huge shortfall to rebuild, potentially exceeding what owners or the association could afford. Some buildings have chosen this route out of necessity – forgoing the expensive excess insurance layers that would top up their coverage to 100%, because the cost was prohibitive. Others have managed to buy the additional coverage on the surplus insurance market (non-admitted insurers), but at extremely high premiums.

Either approach has downsides. If a building remains underinsured (below 100% coverage), it can run afoul of lender requirements. Major mortgage backers Fannie Mae and Freddie Mac require condo buildings to be insured for 100% of their insurable value. Failing to maintain full coverage can land the condo on a “blacklist” with lenders, making it difficult or impossible for buyers to get a mortgage on units in that building. Lenders won’t finance purchases if the collateral (the condo unit) is in a building that might not be rebuilt after a disaster. This is already happening – underinsured condos have seen sales fall through or property values stagnate because loan financing is unavailable. On the other hand, if the AOAO decides to pay for full coverage by buying those expensive excess policies, the cost gets passed to the owners in the form of higher maintenance fees or special assessments. There is no easy fix for boards in this predicament.

HO-6 Unit Owners Insurance – Interior Coverage and Loss Assessments

Apart from the AOAO’s master policy, individual condo owners carry their own insurance policy known as an HO-6. An HO-6 policy (sometimes just called “condo owners insurance”) covers the interior of the unit and the owner’s personal property and liability, picking up where the master policy leaves off. Typically, the condo association’s policy covers the building structure – exterior walls, structural components, and common elements – while the HO-6 covers things like your flooring, cabinets, appliances, interior walls, personal furnishings, and electronics. It also usually provides personal liability coverage (in case someone is injured in your unit or you accidentally cause damage) and coverage for additional living expenses if you have to move out during repairs. In short, the HO-6 is essential protection for a condo owner’s belongings and the interior unit features, since the AOAO policy will not pay for, say, your damaged furniture or a kitchen upgrade you installed.

One important aspect for condo buyers to know is how hurricane coverage works for unit policies. In Hawaii, standard home insurance policies exclude hurricane wind damage – this has been the case since the aftermath of Hurricane Iniki. Homeowners and condo owners typically must obtain a separate hurricane insurance endorsement or policy to cover windstorm losses from named tropical cyclones. Many insurers bundle this as an add-on to the HO-6, but it may appear as a distinct line item (and carry a separate hurricane deductible). This means when evaluating condo insurance costs, owners should consider the premium for hurricane coverage in addition to the base HO-6 policy. Fortunately, the cost for an individual unit’s hurricane coverage is relatively modest compared to the AOAO’s master policy hurricane coverage (because the unit owner is only insuring interior improvements, not the whole building).

HO-6 premiums in Hawaii have risen as well, though not nearly to the extent of the master policies. The same global factors (reinsurance costs, higher claims) are impacting homeowners insurance generally, so condo owners might see higher quotes at renewal. However, the state’s Insurance Commissioner indicated that the homeowners insurance market (which includes HO-6 condo policies) still has adequate capacity and competition – major carriers have not pulled out of Hawaii’s home insurance sector, even if they are tightening underwriting in some areas. In other words, while your HO-6 policy might be more expensive than before, you should still be able to obtain coverage from licensed insurers, and the rate increases have been more modest compared to the multi-fold jumps in association coverage.

HO-6 policies also offer a feature that has become increasingly relevant: “loss assessment” coverage. Loss assessment coverage can help pay for special assessments that the condo association levies on unit owners to cover certain insurance-related losses. For example, if the AOAO’s master policy has a very large deductible or doesn’t fully cover a loss, the association might impose an assessment on all owners to make up the difference. If that loss (e.g. a hurricane or fire) is a covered peril under your HO-6, your policy’s loss assessment clause can reimburse you for your share of the assessment (up to a specified limit). This can be a financial lifesaver in scenarios where, say, each owner is suddenly billed $20,000 to repair hurricane damage that exceeded the building’s insurance payout. Condo buyers should review how much loss assessment coverage their HO-6 policy includes – it’s often something like $10,000 by default, with options to buy higher limits. While this coverage doesn’t prevent the assessment from happening in the first place, it at least shifts the burden from the owner to their insurer for covered losses. Note, however, that loss assessment coverage won’t help if the assessment is for something not covered by insurance (for instance, a purely maintenance-related assessment). It only applies to covered insurance losses (and subject to the HO-6 deductible and limits).

Flood Insurance for Waikīkī Condos

Flooding is another hazard that condo owners and associations must consider, especially in coastal neighborhoods like Waikīkī. Notably, standard condo master policies and HO-6 policies do not cover flood damage – flood is an excluded peril. Instead, flood insurance is provided separately, typically through the National Flood Insurance Program (NFIP) administered by FEMA. Condo associations can purchase an NFIP policy called a Residential Condominium Building Association Policy (RCBAP) which covers the building for flood damage (up to certain limits), and individual unit owners can also buy NFIP coverage for their personal property or for any building coverage not covered by the association’s policy.

In Waikīkī, many condo buildings are located in or near mapped flood zones (for example, parts of Waikīkī are in FEMA Zone AE). Lenders will require flood insurance if a property lies in a high-risk flood zone. Typically, the condo association carries the required flood policy to protect the structure (often an RCBAP covering the building and common areas up to the NFIP maximum), and the cost is paid through the association’s budget or maintenance fees. According to the Hawaii Department of Commerce and Consumer Affairs, NFIP flood insurance for a residential building covers structural damage (e.g. to walls, foundation, electrical systems) up to $250,000 per unit (the NFIP’s limit for residential structures), and contents coverage up to $100,000 per unit owner for personal belongings. For non-residential areas (commercial space) in a condo, NFIP coverage can go up to $500,000. In practice, a large high-rise with many units can secure a few million dollars of coverage via NFIP, but it may not be enough to fully rebuild after a catastrophic flood. Associations sometimes augment NFIP with excess flood insurance from private markets if needed for full protection.

The good news is that flood insurance remains readily available through NFIP for Hawaii condos, and the premiums, while rising under FEMA’s new risk-based pricing, are generally far lower than hurricane insurance premiums. The average flood policy for a homeowner in the U.S. is around $500 per year, though high-risk coastal properties will pay more. Waikīkī condo owners can purchase an individual contents-only flood policy if they want to insure their personal items against flood (since the AOAO’s RCBAP would only cover building elements). It’s worth noting that tsunami damage is considered flood damage under insurance definitions – so an NFIP policy would be the one to respond in the event of a tsunami inundation, which is a relevant risk in Hawaii. Without flood insurance, neither the master policy nor your HO-6 will pay for water damage from storm surge, tsunamis, or heavy rains that cause flooding.

How AOAO Boards Are Responding to the Crisis

Condo association boards have been under immense pressure to adapt to the rapidly rising insurance costs. Their responses have varied, but often include some combination of reducing coverage and raising funds from owners.

Forgoing Full Coverage: As mentioned, a significant number of AOAOs have opted not to renew or replace the entire coverage that was lost when insurers imposed new limits. For instance, if their old policy insured $200 million and now the insurer will only cover $50 million for hurricanes, some boards have simply accepted only $50 million in coverage and hoped for the best rather than pay an exorbitant price for the remaining $150 million from surplus insurers. About 400 condo buildings statewide are now in this underinsured situation of not carrying 100% replacement coverage. It’s a calculated risk that exposes owners to potential huge special assessments if a disaster strikes, but for some associations the alternative (tripling maintenance fees to afford full coverage) was deemed even less tenable.
Purchasing Excess Insurance Layers: Other AOAOs – especially in higher-end buildings or those with more resources – have bitten the bullet and purchased additional insurance layers on the secondary market to achieve full coverage. This often involves going to surplus lines insurers (unregulated carriers willing to insure higher risks at higher cost). As noted, these excess policies can cost hundreds of thousands of dollars annually. To afford this, condo boards have had to dramatically increase the budget for insurance, making insurance one of the largest single expenses for many condos in 2024–2025.
Special Assessments and Fee Hikes: Whether to pay a big premium increase or to fund a shortfall reserve, many associations have had little choice but to levy special assessments on unit owners or raise monthly dues. For example, one townhome community on O‘ahu was hit with a 300% insurance premium spike, and the board billed each owner $4,670 extra due within a few months to cover the gap. Some owners had to tap retirement savings or take loans to meet this sudden bill. In high-rise condos, boards have reported mid-year maintenance fee surcharges or special assessments solely to pay the insurance premium, sometimes in the thousands of dollars per unit. Going forward, many AOAOs are permanently increasing monthly maintenance fees to build up funds for the expected higher insurance costs each year. These moves, while necessary to keep policies in force, are financially straining for residents – especially retirees or those on fixed incomes.
Reducing Risk (Long-Term): Aside from insurance buying strategies, some condo boards are also looking at ways to make their buildings less risky (and hopefully more insurable or eligible for credits). This includes investing in infrastructure upgrades like modern fire alarm systems, sprinkler retrofits, or plumbing overhauls. Older Waikīkī condos often have aging pipes that cause frequent water damage claims, or lack fire sprinklers – factors that insurers cite when hiking premiums. A few associations are fast-tracking these capital improvements (even though they too require owner assessments to pay for) in hopes of avoiding even worse insurance outcomes later. For example, after the 2017 Marco Polo condo fire in Honolulu, buildings recognized the importance of fire safety – now, with insurance so costly, installing sprinklers or new electrical systems might eventually lead to lower premiums. Such risk-mitigation projects are a longer-term response and less immediately common than the financial maneuvers above, but they are part of the conversation.

Impact on Buyers and the Real Estate Market

The condo insurance crisis has tangible effects on buyers and sellers in Waikīkī. If you are looking to buy a condo, the building’s insurance situation can directly affect your ability to obtain a mortgage and the carrying cost of the unit:

Mortgage Approval: As mentioned, lenders require that the condo building be adequately insured. If a building is known to be underinsured or on an insurer’s watchlist, banks may decline to approve a loan for a unit in that building. This tends to shrink the pool of eligible buyers to only cash buyers, which in turn can depress the condo’s market value. Real estate agents in Hawaii have noted a slowdown in sales in some buildings due to this issue – units sit longer on the market or sell for less, because buyers can’t easily finance the purchase. Waikīkī, with its mix of residential and vacation condos, is particularly sensitive to financing hurdles, since many buyers rely on conventional loans.
Higher Maintenance Fees: Prospective buyers will also find that maintenance fees (association dues) have climbed significantly in many buildings to cover the new insurance premiums. Insurance used to be a smaller line item in a condo budget, but now it can rival utilities or payroll in scale. A maintenance fee that was $0.70 per square foot per month might jump to $0.90 or $1.00 just because of insurance. For buyers, that means higher monthly out-of-pocket costs and potentially reduced affordability of the unit. This is on top of already high Hawaii real estate costs. For example, an owner at one Honolulu condo saw her monthly association fee go up $71 specifically due to the insurance rate hike. These increases affect renters too (landlords pass on costs), contributing to Hawaii’s cost of living pressures.
Special Assessments: Buyers should also check if any one-time assessments have been enacted or are planned to deal with insurance. If you buy into a building right after a big special assessment, the seller might have paid it – but if one is upcoming, a new buyer might be on the hook. Conversely, if a building chose not to fully insure, buyers should weigh that risk – you might face a massive emergency assessment later if disaster strikes with insufficient coverage.
Insurance Disclosure: Hawaii law requires that condo sellers disclose material facts, and insurance coverage is becoming one of those key facts. Buyers are increasingly asking: Is the building fully insured? What are the deductibles? Who is the insurer? If the master policy is with a surplus lines carrier with unusual terms, or if there’s a huge hurricane deductible (e.g. 5% of $200 million = $10 million deductible), those are details a prudent buyer will want to know, as they could signal future costs or risks (like potential post-hurricane assessments).

In short, the insurance crunch has added a new layer of due diligence for Waikīkī condo buyers. It’s not just about checking the apartment and amenities – now one must review the building’s insurance status, much like you’d review its financial reserves or structural reports. The volatility in insurance also means this year’s situation could change next year, injecting uncertainty. Real estate professionals in Hawaii have called this “a crisis in the condo market” that is “already impacting resales of condos and townhouses” statewide. Until stability returns, buyers and sellers alike need to navigate these insurance-related challenges carefully.

Legislative Action and Future Solutions

The magnitude of Hawaii’s condo insurance problem has prompted action from policymakers. Both state officials and legislators have been working on emergency measures and long-term solutions to stabilize the market, drawing lessons from past insurance crises (like Hurricane Iniki in 1992) and observing approaches in other states. Here is a summary of what has been done or proposed:

Emergency Proclamation (2024): In August 2024, Governor Josh Green issued an emergency proclamation to address the condo insurance crisis. This executive action was taken after legislative proposals earlier in 2024 failed to pass. The proclamation acknowledged that “unprecedented rate increases” were placing an unbearable burden on Hawaii homeowners and that immediate steps were needed to “stabilize our insurance market”. The emergency order set up a joint task force of the Insurance Commissioner, legislative leaders, and industry representatives to find solutions. It also empowered the state to provide additional options for condominium associations to obtain property and hurricane insurance. In effect, this opened the door for the state to assist as an “insurer of last resort,” similar to what was done after Iniki. (After the 1992 hurricane, when many insurers pulled out of Hawaii, the state created the Hawaii Hurricane Relief Fund to offer hurricane policies until the private market recovered.) The 2024 emergency proclamation was a temporary measure (effective through October 2024) intended to jump-start longer-term fixes.
Legislative Attempts (2024): During the 2024 legislative session, lawmakers considered bills to shore up the insurance market. One major proposal, House Bill 2686, aimed to revive the dormant Hawaii Hurricane Relief Fund (HHRF) and expand its role to cover condos. Essentially, it would reactivate the state hurricane insurance program from the ’90s and allow it to insure condominium buildings, not just single-family homes. The bill garnered broad support from insurance companies, banks, and condo groups. However, in the final days of session, HB 2686 stalled in conference committee and did not pass. That failure directly led to the governor’s emergency action in August, as premiums continued to climb without relief.
New Law Establishing State Insurance Programs (2025): In the 2025 session, Hawaii’s legislature took up the issue again and this time succeeded in passing a reform measure. Lawmakers approved a bill to empower state-backed “insurers of last resort” and create loan programs for condo associations. The legislation, championed by Rep. Scot Matayoshi and Sen. Jarrett Keohokalole among others, does several things. First, it amends state law to let the Hawaii Property Insurance Association (HPIA) and the Hawaiʻi Hurricane Relief Fund underwrite condo insurance risks that private insurers won’t cover. HPIA is an existing entity that traditionally provided fire/hazard insurance for high-risk areas (like lava flow zones), and HHRF (though inactive for years) still has funds available. Under the new law, HPIA will receive $30 million in funding to start offering condo policies, and HHRF has about $175 million that can be used to support the market. The idea is that if a condo association gets non-renewed or cannot find any affordable coverage, the state-backed pool can step in to offer a policy, ensuring no building is completely left bare. Initially, this is targeted at condos four stories and up which are facing the biggest insurance troubles. Hawaii officials describe this as creating an “insurer of last resort” for condos – a safety net, not meant to compete with private insurers but to fill the gap when the market fails.
Condo Resilience and Loan Program: The 2025 law also recognizes that part of the problem is the condition of older condo buildings. So, it established a low-cost loan program to help condo associations finance critical repairs and upgrades (like plumbing replacements or installing fire sprinklers). This program will be run through the Hawaii Green Infrastructure Authority and starts with a $20 million state fund to provide below-market loans. By enabling associations to borrow money cheaply for infrastructure improvements, the state hopes to reduce the factors that lead to huge insurance claims (for example, minimizing water damage from burst pipes, or fires in buildings without sprinklers). Lower risk should eventually translate to more reasonable premiums. Additionally, a reserve fund will be set up to attract investment from Community Development Financial Institutions, further expanding loan capital for condo projects.
Ongoing Studies and Future Options: While the new initiatives are significant, lawmakers acknowledge they may not be a complete cure. The 2025 bill calls for a comprehensive study on what more the state can do to stabilize property insurance, given the limits of a small local market against global insurance forces. Policymakers are exploring ideas such as incentives to draw more insurance companies to Hawaii, catastrophe funds, and even mandatory hurricane insurance requirements for all homeowners (to spread risk). Any larger interventions – like a permanent state-run insurance company or joint underwriting associations – will require careful analysis, funding, and possibly federal support. The current measures are somewhat of a pilot to stop the bleeding: officials hope they will provide immediate relief to the most at-risk condos and buy time for longer-term market adjustments. The legislature has also signaled that if the crisis worsens, they are prepared to scale up the state’s involvement as needed.

In summary, Hawaii’s government is actively trying to tackle the condo insurance crisis on multiple fronts: short-term emergency intervention, medium-term support via state-backed insurance and loans, and long-term market reforms under study. This multi-pronged effort is reminiscent of past solutions (like the post-Iniki hurricane fund) and mirrors actions in other disaster-prone states (for example, Florida’s state insurer “Citizens” or California’s FAIR Plan for fire insurance). For now, Hawaii condo owners and buyers should see some relief as these programs roll out, but it will take time for premiums and coverage availability to stabilize.

Conclusion

The current instability in Hawaii’s condo insurance market has been driven by extraordinary circumstances – from global catastrophe losses and rising reinsurance costs to a local wildfire disaster – resulting in a perfect storm of surging premiums and strained availability. Condo buyers in Waikīkī and across O‘ahu are entering a market where insurance considerations are front and center. It’s essential to understand the different types of coverage involved in condo ownership: the AOAO master policy (and its health), your own HO-6 unit policy (and what it does and doesn’t cover), and separate coverages like hurricane and flood insurance. Each piece plays a role in protecting your investment.

While the situation is challenging, it’s not all doom and gloom. State and community leaders are taking steps to restore stability, and the insurance industry, though wary, has not abandoned Hawaii. Premiums are high, but efforts are underway to inject new capacity and to mitigate the factors driving those costs. In the meantime, prospective buyers should stay informed: review condo documents for insurance information, ask questions about coverage levels and deductibles, and factor the current insurance premiums into your budgeting. The market is dynamic, and changes – whether it’s new state-backed insurance options or adjustments by private insurers – will continue over the next year or two. By understanding the landscape as outlined above, Waikīkī condo buyers can better navigate the complexities and make informed decisions grounded in the factual realities of Hawaii’s insurance climate.

Sources: This article is based on information from government agencies and reputable news outlets, including the Hawaii Department of Commerce and Consumer Affairs, FEMA, the Office of the Hawaii Governor, Honolulu Civil Beat, Hawaii News Now, the Honolulu Star-Advertiser, and Hawaii Business Magazine, among others. All data and quotations are factual, drawn from these sources to ensure accuracy in explaining Hawaii’s condo insurance conditions as of mid-2025.

Disclaimer: This article is provided for general informational purposes only and does not constitute legal, financial, or insurance advice. Market conditions, laws, and regulations change frequently; readers must conduct their own due diligence and consult qualified professionals before making decisions. The author disclaims all liability for errors, omissions, or any losses arising from reliance on the information herein.