On January 23, 2017, Hawaii lawmakers introduced a bill to establish a pilot parametric disaster insurance program aimed at preventing potential liquidity gaps between federal assistance and total economic losses in the event of a serious natural disaster. Parametric or index-based insurance programs peg claims to specific characteristics of natural disasters rather than the usual insurance arrangement basing payouts on actual losses sustained. The bill lists one example of a metric to determine whether coverage under a parametric disaster program would be triggered—if the maximum wind speed of a hurricane as it passes through a specific part of the islands reaches a certain threshold, coverage attaches.
If passed, H.B. 791 would establish a three-year parametric disaster insurance pilot program and empower the state to research and purchase parametric disaster insurance. A parametric disaster insurance special fund would be financed with interest earned on the principal in the currently existing hurricane reserve trust fund, any money paid out under parametric disaster insurance policies, and any appropriations made by the state legislature. The bill further requires a report to the legislature on the pilot program due by December 1, 2019, and calls for the repeal of the program on June 30, 2020. A companion bill, S.B. 799, was introduced in the state senate on January 20, 2017.
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