Connect with:
Tuesday / February 4.
HomeBlogThe Insurance Crisis Continues to Grow (Not Only for HOAs) 

The Insurance Crisis Continues to Grow (Not Only for HOAs) 

HOA Detective™ – Jan 28, 2025: If you have been following the HOA Detective™ for any period the HOA insurance crises is not news. What you may not know is that problem has suddenly erupted like an uncontrolled wildfire which is set to spread throughout the country. Recent reports like the one below written by NY-based housing reporter Claire Boston, discusses insurers withdrawing coverage from Homeowners Associations (HOAs) in Southern California and Florida while it underscores a growing concern that extends far beyond these regions. The availability and affordability of casualty (property) insurance is not confined to specific states; it is a nationwide challenge that threatens to escalate insurance rates and impact the stability of housing markets across the United States.

https://finance.yahoo.com/news/insurers-are-dropping-hoas-threatening-the-condo-market-124429337.html

A Nationwide Concern

While Southern California and Florida have garnered attention due to their high-profile insurance challenges, other states are experiencing similar issues. In Oregon, for instance, homeowners are grappling with soaring premiums and limited property insurance options, particularly in areas prone to wildfires. Major insurers have significantly reduced their presence in central, southern, and eastern Oregon, forcing some homeowners to resort to insurers of last resort. 

https://oregoncapitalchronicle.com/2024/02/26/oregon-homeowners-face-soaring-premiums-few-property-insurance-options-over-wildfires/

Similarly, in Colorado, nonrenewals are fueling a growing homeowners insurance crisis. Homeowners’ premiums have increased nearly 60% over five years, with insurers increasingly opting not to renew policies in high-risk areas. 

https://coloradosun.com/2025/01/19/colorado-home-insurance-nonrenewals-crisis/

The Role of Climate Change

A significant driver behind these developments is the increasing frequency and severity of natural disasters attributed to climate change. The U.S. Treasury Department’s recent report reveals that homeowners in the top 20% of riskiest areas paid 82% more in premiums compared to those in the lowest-risk areas between 2018 and 2022. This disparity highlights the systemic risk posed by climate change to the financial system and underscores the need for comprehensive strategies to address rising insurance costs. 

https://www.theguardian.com/environment/2025/jan/22/us-homeowners-insurance-costs-climate-crisis

Impact on Homeowners Associations

HOAs are particularly vulnerable in this evolving insurance landscape. Traditionally, HOAs have relied on collective bargaining power to secure favorable insurance terms. However, as insurers reassess risks associated with natural disasters, many HOAs are facing nonrenewals and struggling to find new coverage. This situation is not limited to high-profile states; it is a trend observed across the country. 

Consequences for Homeowners

The implications for homeowners are significant. Rising insurance premiums contribute to the growing costs of homeownership and property management. From the Great Recession to the present, homeowner insurance prices have increased by 74%, outpacing the more than 40% increase in home prices, even after adjusting for inflation. Real premiums have risen approximately 20% between 2020 and 2023 alone. 

https://www.jchs.harvard.edu/blog/insurance-crisis-continues-weigh-homeowners

For residents in HOA-governed communities, the financial strain can be even more pronounced. Increased association dues, special assessments, and the potential for decreased property values are real concerns as insurance costs continue to climb.

A Call to Action

Addressing this issue requires a multifaceted approach. Homeowners, HOAs, insurers, and policymakers must collaborate to develop strategies that mitigate risks and manage costs. This includes investing in disaster-resistant infrastructure, implementing proactive risk management practices, and advocating for policies that promote insurance market stability.

Homeowners should engage with their HOAs to understand the community’s insurance coverage and explore options for risk mitigation. HOAs can play a pivotal role by implementing community-wide measures to reduce risk, such as maintaining defensible space in wildfire-prone areas or investing in infrastructure improvements to withstand natural disasters.

Insurers, on their part, need to balance risk assessment with the provision of affordable coverage options. Innovative insurance products that incentivize risk reduction measures can be part of the solution.

Policymakers must also be involved to ensure that regulatory frameworks support both the availability and affordability of insurance. This may include revisiting building codes, land-use planning, and providing support for communities investing in resilience measures.

Conclusion

The challenges facing HOAs and homeowners concerning insurance coverage are a microcosm of broader issues affecting communities nationwide. By recognizing the widespread nature of this problem and taking proactive steps, stakeholders can work together to navigate the evolving insurance landscape and ensure the long-term stability and affordability of housing across the country.

Because You’re Buying More Than a Home! 

Share

No comments

Sorry, the comment form is closed at this time.