Last October, as the South was reeling from hurricanes Milton and Helene, we discussed how Homeowner Associations (HOAs) were already facing soaring insurance costs due to climate change, increased litigation, and inflation. As wildfires ravage communities in the Los Angeles area, insurance concerns are once again front-page news, continuing to exacerbate an already challenging insurance landscape for HOAs. 

As of January 28, 2025, these fires have resulted in at least 29 fatalities, forced over 200,000 residents to evacuate, and destroyed or damaged over 16,000 structures. This widespread destruction has intensified the strain on the insurance market, leading to significant premium hikes and reduced coverage availability for HOAs. 

Before exploring how HOAs and association management companies can navigate these insurance challenges, let’s look at how we got here.

Factors Contributing to Rising HOA Insurance Costs

1. Increased Frequency of Natural Disasters: The surge in wildfires, hurricanes, and other natural disasters has led to substantial property losses. Insurers, facing higher claim volumes, are adjusting premiums amid growing concern over the insurance sector’s ability to cover climate-related losses.
2. Market Withdrawal by Insurers: In response to escalating risks, several major insurance companies have ceased offering new policies in high-risk areas like California. This reduction in market competition has diminished options for HOAs, often resulting in higher premiums from the remaining providers.
3. Inflation and Reconstruction Costs: The economic aftermath of the wildfires includes increased construction costs due to heightened demand for materials and labor. This inflationary pressure further drives up insurance premiums as the cost to rebuild has escalated.
   

When insurers pull out of climate disaster-prone markets and cancel policies, the long-term results can devastate communities.

"If insurance companies are allowed to pull out of markets where they're not making money or they're operating at a loss, then nobody wants to buy anything there because they can’t get insurance to cover them,” Lindsey Richardson, Sales Engineer at CINC Systems, explained. “Who’s going to go buy a house that they can’t get insurance on? You end up with these pockets of places where nobody wants to live. It’s like a desert town."

In response, California Governor Gavin Newsom signed a one-year moratorium preventing insurers from withdrawing from the market. While this measure provides temporary relief, it does not address the long-term challenges. When the moratorium expires, experts predict a mass exodus of insurers from California unless new legislation is enacted.

In the meantime, HOAs and management companies everywhere should proactively take steps to minimize potential impacts on their communities and bottom lines. After all, insurers are likely to pass the costs of wildfire claims to policy owners nationwide—not just in high-risk locations.

Strategies for HOAs to Navigate the Insurance Crisis

• Regular Policy Reviews: HOA boards should conduct annual assessments of their insurance policies to ensure adequate coverage and compliance with governing documents. This proactive approach allows for timely adjustments in response to changing market conditions.
• Risk Management Implementation: Adopting comprehensive risk management strategies, such as regular property inspections and maintenance of common areas, can mitigate potential claims. Demonstrating a commitment to risk reduction may make HOAs more attractive to insurers.
• Exploring Alternative Insurance Options: Given the withdrawal of some insurers from the market, HOAs might consider alternative insurance solutions, including participation in state-backed insurance programs or pooling resources with other associations to secure more favorable terms.

Looking Ahead

The intersection of wildfires, insurance challenges, and housing costs presents a complex and evolving issue. 

Whether through federal legislation, state-level initiatives, or private-sector innovation, solutions must balance the needs of insurers, homeowners, and society. For now, the best course of action is preparation—financially, politically, and personally—for a future where these challenges may become even more common.