State Insurance Commissioner J.P. Schmidt is hunting for more insurers to provide hurricane coverage for homeowners after Zephyr Insurance Co. said it would restrict its business here.

Zephyr is Hawai'i's largest residential hurricane insurer and stopped issuing new policies for certain types of homes on Saturday. It said reinsurance availability had declined and rates had gone up.

"The over-riding reason is that they rely on reinsurance to minimize their risk," Zephyr spokeswoman Lynette Lo Tom said. "Because of Hurricane Katrina, coverage is less available and more expensive."

Reinsurers — companies that insure insurance companies — are raising the cost of coverage and forcing insurers to cut back coverage in risky areas, according to the Insurance Information Institute. Last year U.S. insurance company losses from natural catastrophes rose to $57.7 billion.

Schmidt said he was talking with companies in Hawai'i about their willingness to take on new customers. He is also exploring the possibility of new insurers coming here. Since hurricane insurers pulled out of Hawai'i after 1992's Hurricane Iniki, the state started the Hurricane Relief Fund, which provided coverage until companies re-entered the market.

"The best option is bringing in new insurers to the marketplace so that homeowners have alternatives," Schmidt said. "We are in the process of doing that."

Zephyr, which sells only hurricane insurance, will stop selling new policies for single-wall homes that were once a popular local construction style.

It will also stop issuing new policies for homes built before 1981 and not brought up to the 1993 or 1994 uniform building codes when it comes to retrofitting with hurricane clips. The insurer will also restrict new coverage for homes within 2,500 feet of the ocean that lack flood insurance, Lo Tom said.

She said current Zephyr policy holders won't be affected by the change. The company is also reviewing its rates.

Zephyr's decision may cause problems for people seeking hurricane insurance when they refinance or purchase a home with single-wall construction or an older residence that hasn't been outfitted with the storm clips because lenders require such coverage.

Steve Tabussi, vice president of First Insurance Co., the state's No. 3 hurricane insurer, said it's only a matter of time before the next hurricane hits Hawai'i and that insurers have to balance their costs against how much they charge and can offer.

First Insurance "paid every claim dollar for dollar for Iniki and we intend to be here after the next hurricane," he said.

He said First Insurance has not altered its hurricane offerings for two years, though it does require that single-wall homes meet certain guidelines.

Schmidt said Dongbu Insurance Co., South Korea's third-largest nonlife insurer, will start business here next month. Another insurer, ICAT, also wants to enter this market, he said.

Jin Gou Lee, Dongbu spokesman, said the company will offer policies for single-wall construction homes, though it will be more expensive than coverage for homes with double-wall construction, and the homes must meet certain guidelines.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.