HILO, Hawai'i — Local and federal leaders are planning to push for government-backed natural hazard insurance to guard against losses when affordable coverage can't be readily purchased on the private market.

Big Island Mayor Harry Kim said virtually all of the estimated 1,637 homes damaged last Sunday were not covered for earthquake losses.

Hawai'i insurance executives contend earthquake coverage is pricey but available if consumers shop around, but Kim contends earthquake insurance hasn't been generally available on the Big Island for many years.

"I think the only answer to this, as we've stated all along, is that we push for a national all-hazards insurance," he said.

U.S. Rep. Neil Abercrombie said Democrats are planning to advance a federal hazard insurance plan that emerged from their scrutiny of uninsured losses from Hurricane Katrina.

"This is not some knee-jerk deal that we've put together. This is something that we've been working on collectively for the better part of a year," Abercrombie said. "Even in California, the penetration for earthquake insurance is very, very low if my information is correct, and it's very, very expensive."

There are no estimates yet on the dollar value of the damage to Big Island homes, but the losses to roads, schools, utilities, businesses and government facilities have already climbed beyond $100 million.

The island racked up those losses even though it was spared the brunt of the magnitude 6.7 and 6.0 earthquakes because they were both centered offshore.

The quakes apparently did not even topple a single Big Island utility pole, and Kim pointed out that the Big Island is vulnerable to much larger temblors.

"You've got to know how lucky we are on that," Kim said. "We've had bigger."

LOOKING TO UNCLE SAM

J.P. Schmidt, Hawai'i's insurance commissioner, said he has looked at several options to help make earthquake coverage more affordable, including whether a local fund could provide coverage.

"It is something that I am continually looking at because dealing with a catastrophe is a very difficult thing," Schmidt said. "I don't think anybody has a good answer yet."

Schmidt has joined with other state insurance commissioners in advocating a national program for large-scale natural disasters. The commissioners have proposed a set of programs that include enacting and enforcing better building codes and creating a national catastrophe fund.

"Disasters such as hurricanes, earthquakes, tornadoes and floods at a certain level go beyond an individual state's ability to cover them," Schmidt said. "Therefore, a federal program would be a better approach to providing coverage for people."

Nationally, fewer than one in six homes carries earthquake insurance, according to a study this month by insurance rating agency A.M. Best Co. In California, the state that's suffered the most earthquake damage, only 14 percent of homeowners carry it.

The number of policies in California has fallen from the more than 30 percent rate after the 6.7-magnitude Northridge temblor in 1994 that caused $17.8 billion in insured property losses.

"As time has passed and memories have dimmed, the level of participation has dropped off sharply," said John Williams, a co-author of the A.M. Best study. "That seems to be the pattern around the world."

The report didn't include how many homes are insured in Hawai'i, but there's little disagreement in the local insurance industry that the numbers are miniscule. A.M. Best determined that $4.4 million worth of earthquake insurance premiums were written in the state, ranking it No. 33 in the U.S.

This compares to Hawai'i's ranking as the third most active state for earthquakes. The Aloha State had 1,533 quakes of magnitude 3.5 or greater between 1974 and 2003, according to the U.S. Geological Survey. Only Alaska (12,053) and California (4,895) had more.

Most of the Hawai'i temblors were centered around the Big Island, where insurance agents report that earthquake insurance is available, though difficult to find and expensive.

Not many people request it, though, even after going over their homeowner policies with insurance agents. The homeowner policies generally exclude damage from floods, hurricanes and earthquakes, which require separate coverage.

Clueless consumers?

Kim said he learned from his years as head of the Big Island Civil Defense agency that most people don't have a clear idea of what coverage they have, and don't understand the fine print on standard homeowner policies.

Nationally, Kim believes, people also do not realize they are exposed to hazards such as earthquakes and tsunamis that are not covered by their insurance. And if the coverage is available, "the premiums are so high that a lot of people will opt not to take it," he said.

Abercrombie cited a report by the Katrina Task Force led by U.S. Rep. Gene Taylor of Mississippi and Rep. Charlie Melancon of Louisiana, which argued for an "all-perils disaster insurance coverage backed by the federal government."

The report found that the patchwork of private insurance left gaps in coverage. Instead of rushing in with relief for people who suffer uninsured losses, the report argues, the federal government should set up a program to provide coverage and collect premiums before a disaster strikes.

The report also contends that the federal government should encourage state programs to cover natural disaster losses, an idea that state Rep. Bob Herkes, D-5th (Ka'u, S. Kona), said he wants to again pursue at the state Legislature next year.

Herkes has argued that the state should establish a program to provide earthquake and other hazard coverage that is not widely available in the private market, and should use the $190 million in the Hawai'i Hurricane Relief Fund to buy reinsurance, which is a kind of insurance for insurance companies, to back the state program.

Kim said he wants such a program as an interim step in case any federal initiative becomes bogged down in Congress.

The state has done similar interventions in the private insurance market at least twice before.

State lawmakers set up a special fund to offer hurricane coverage after private insurers discontinued that after Hurricane Iniki, and another state-backed program now offers coverage for homes built in areas of the Big Island that are at the greatest risk of lava inundation.

The state-backed program to provide hurricane coverage withdrew from the market after private insurers once again began offering coverage.

Schmidt said the state operating an earthquake insurer may not be the answer, though he continues to investigate the possibility.

FLORIDA'S WOES

In Florida, a shortage of hurricane insurance resulted in the state setting up a company writing policies for homeowners who couldn't get coverage elsewhere. Schmidt said that fund, hit by hurricane claims, now has a $2 billion deficit and has had to ask the Florida Legislature for more money.

Schmidt said he also looked at converting the $190 million Hurricane Relief Fund into a reinsurance fund that could back up companies writing catastrophic insurance policies and possibly lower rates. Another idea being explored is to issue special bonds to help provide reinsurance.

"We need to fully assess the kind of damage that has occurred here and what kind of disaster programs will provide help for these people," Schmidt said.

A state fund like that proposed by Kim and Herkes might be able to lower rates if it could get enough customers to spread the risk.

Even the California Earthquake Authority has had trouble convincing many homeowners to buy its coverage, which costs an average of $700.

Nancy Kincaid, a CEA spokeswoman, said most of its customers are older people who have lots of disposable income and equity in their homes and that the insurer has had problems getting younger homeowners to buy the coverage.

"Californians are pretty cavalier about earthquakes," Kincaid said.

While lenders require hurricane and sometimes flood insurance for people getting mortgages, earthquake policies aren't mandated. There are only 54,208 flood insurance policies in Hawai'i, even though the cost is much lower than for earthquake policies. Dick Budar of Thompson-Budar Insurance said many people drop hurricane coverage once they make their final mortgage payment.

As for earthquake coverage, "I've been in business for 40 years and no one has ever asked me for it," Budar said.

Rick Sakata of R. Sakata Insurance in Honoka'a said the first inquiry he'd received about earthquake coverage in his 27 years in the business was last Thursday, when his brother inquired about getting a $600,000 policy for a home in Kona.

Sakata contacted a broker who quoted him a rough estimate of $2,500 annually for a policy where the homeowner pays the first 5 percent of damage. That works out to $30,000 for that policy.

ALREADY AVAILABLE

Other companies charge less. State Farm Insurance Co., which sells earthquake coverage on Maui, Kaua'i and O'ahu, said pricing varies on a case-by-case basis, with the biggest variables being the value of the home, type of construction and amount of deductible.

In the case of a wood-frame home on Maui, it might charge $600 a year for a $600,000 policy with a 10 percent deductible.

State Farm, which has received 330 damage calls related to last Sunday's earthquakes, said the deductible would work out to the homeowner paying the first $60,000.

"It's designed for really big damage," said State Farm spokeswoman Carolyn Fujioka.

Utah-based Poulton Associates, operator of the InsureCat .com Web site, said it is offering an insurance product covering earthquakes, lava, floods and landslides. It recently gave a Hilo homeowner a quote of $919 a year for $250,000 of coverage on the home, $50,000 to contents, $25,000 for damage to other structures and living expenses of $25,000.

Poulton's product has had a slower-than-expected adoption rate since being introduced early last year. Company president Craig Poulton said Lloyd's of London, which underwrites the policies, might force his company to withdraw the product if business doesn't improve.

It remains to be seen whether last week's events will jolt people into buying earthquake insurance locally. Some insurers have declared a temporary moratorium on new earthquake policies until more is known about the damage.

Reach Greg Wiles at gwiles@honoluluadvertiser.com and Kevin Dayton at kdayton@honoluluadvertiser.com.