Key Takeaways:
The Residential Property Insurance market continues to be shaped by the increasing frequency and severity of CAT natural disasters and rising replacement costs.
In 2024, insured losses from catastrophic weather events in the U.S. are estimated at $113 billion. Additionally, the wildfires that devastated Southern California in January highlight the fact that the risk of natural disasters now exists year-round.
Alongside the rise in CAT events, inflationary pressures have driven up replacement costs. For instance, the average cost of a new roof has consistently increased, often exceeding 5 percent due to higher material, labor, and transportation costs.
These challenges are tightening the insurance market, leading to increased rates and reduced capacity. As a result, more insured individuals are turning to the E&S market, which offers tailored coverage, flexible deductibles, and the ability to quickly adapt to unique risks.
Regional Updates
California and West Coast
The devastating Eaton and Pacific Palisades fires in January 2025 killed at least 29 people and burned across 60 square miles in the Los Angeles area. Property losses could top $30 billion. These historic costs and massive amount of destruction will create a rejuvenated hard market in the region that had begun to soften after a milder wildfire season in 2024, at least by recent standards.
Insureds in California and parts of the West Coast at high risk for wildfires already were largely unable to get policies from admitted carriers. The recent wildfires have forced non-admitted carriers to reassess their risks in the regional market, similar to what clients in states like Florida and Louisiana have experienced.
Moving forward, the California and West Coast market will face new adjustments as it becomes even more reliant on E&S carriers. Some experts believe California has already evolved into an “E&S state” since even non-admitted carriers are utilizing an admitted carrier approach to new business, such as strict aggregate management. While wildfire is the biggest CAT threat to the region, underwriters also factor in the threat of earthquakes, especially in areas like northern California and the Pacific Northwest. Non-admitted carriers are also looking more closely at other risk factors such as brush, loss history, and the age of the property.
While the California FAIR Plan is also an option for homeowners unable to secure coverage for high-risk properties in the traditional market, it often falls short of full replacement cost, leaving insureds searching for creative E&S solutions.
Midwest
Convective storms, including tornadoes, hail, and wind-driven rain, are increasing in severity and frequency across the Midwest. In March 2024, 100 tornadoes, including three EF-4 strength storms, devastated communities across 14 states and extended beyond the country’s traditional “tornado alley” into the Northern Plains, Tennessee Valley, and Upper Midwest. According to Swiss Re Institute, the first half of 2024 was the second costliest on record for insured losses from severe thunderstorms, at $42 billion—87% higher than the 10-year average.
As a result, admitted carriers have imposed stricter underwriting guidelines, such as declining policies for homes with roofs older than 15 years. While these restrictions create challenges for homeowners, they present opportunities for brokers and agents to secure innovative E&S solutions, including:
- Roof depreciation schedules: Traditionally used for metal roofs, these schedules are now applied across various roof types to help carriers manage exposure.
- Exclusions for older roofs: Policies can be structured to carve out roof coverage entirely, allowing insureds to limit costs while still securing protection for the rest of their property.
Gulf Coast and Southeast
After several years of record-breaking hurricanes and rate hikes, the 2024 hurricane season was relatively mild, leading to a renewed presence of carriers in the Gulf Coast and Southeast. In some cases, premiums have even declined slightly year-over-year, creating a more stable market. This shift also opens the door for insureds to explore specialty coverage options not available in the admitted market.
Despite these positive trends, the risks in this region remain high. Hurricanes, flooding, and extreme wind events continue to pose significant challenges. For properties directly on the coast, standard windstorm deductibles can be as high as 5-10% of the insured value. For instance, a $500,000 home could carry a deductible of $50,000 for wind damage. Wind deductible buybacks offer homeowners a way to reduce their out-of-pocket expenses in exchange for a higher premium.
Although it has been a few years since the eastern Carolinas experienced a major hurricane, Hurricane Helene brought a once-in-500-year flooding event to western North Carolina in 2024, resulting in 20 inches of rain in less than two days. The storm and its aftermath caused an estimated $53 billion in damage, and most of the impacted homes lacked Flood Insurance. Flooding is not covered under standard Homeowners Insurance policies, and as flooding risks continue to increase across the U.S., securing Flood coverage is becoming increasingly important.
Additionally, brokers and agents in areas with higher risk profiles, like coastline areas of Texas that can experience flooding, convective storms, and hard freezes, may consider layering coverage to spread risk among multiple carriers. Layered solutions can spread risk, provide higher total insured values (TIVs), and ensure clients have the protection they need.
The Critical Role of Risk Mitigation Strategies
Homeowners can lower their risk profile—and potentially secure better coverage—by mitigating risks. Additionally, some carriers now require specific mitigation efforts before offering policies. Risk mitigation strategies include:
- Installing high-quality roofing materials to improve resistance to wind and fire damage.
- Managing trees, brush, and vegetation around the property to reduce wildfire risk. With more real-time satellite imagery available to carriers, poorly maintained properties could be subject to rate increases or non-renewals.
- Using third-party resources like Wildfire Defense Systems (WDS). WDS specializes in wildfire mitigation and loss prevention services and is available to Burns & Wilcox policyholders to protect homes from wildfires.
- Using centrally monitored alarms and water shutoff devices to prevent costly losses.
- Performing routine maintenance such as HVAC updates, plumbing and electrical inspections, and timely replacements of major systems like hot water heaters.
Tips for Brokers and Agents
- Educate clients on roof-related coverage. Many standard carriers no longer insure roofs older than 15 years. E&S markets offer solutions such as roof depreciation schedules and exclusions.
- Utilize wind deductible buyback programs. Coastal properties often face high windstorm deductibles (5-10%). Buyback programs help lower out-of-pocket costs, making coverage more accessible.
- Explore additional coverages with clients. Standard policies often exclude damage from flooding and earthquakes—yet these perils pose major financial risks.
- Consider layering coverage for high-value homes. Structuring policies across multiple carriers can ensure adequate limits and protection.
- Emphasize risk mitigation. Fire-resistant roofs, monitored alarms, and water shutoff devices can improve insurability and lower rates. Additionally, some carriers now require mitigation measures before issuing policies.
- Encourage transparency. Clients should document property conditions, upgrades, and prior claims to streamline underwriting and secure better terms.
- Partner with an experienced E&S wholesaler. Rates, deductibles, and coverage restrictions continue to tighten. A partner like Burns & Wilcox can help you stay ahead of market shifts, offer risk mitigation strategies, and provide access to exclusive markets.
As CAT weather events become more unpredictable and severe, flexibility in coverage, creative risk-sharing solutions, and proactive mitigation efforts are critical to keeping homes insured. Burns & Wilcox has a team of experts dedicated to creating customized coverage for CAT-exposed and other high-risk properties. Contact us today for comprehensive Residential Property Insurance solutions.
Contributors: Larry Paulaski, Regional Vice President, Southwest, Burns & Wilcox, Scottsdale, AZ; Berri Willis, Vice President, Managing Director, Burns & Wilcox, Morehead City, NC; Kate Wright, Associate Vice President, Senior Regional Practice Group Leader, Personal Insurance, Burns & Wilcox, Indianapolis, IN; Ian Hanson, Associate Vice President, Underwriting Director, Personal Insurance, Burns & Wilcox, San Francisco, CA
