In recent years, cataclysmic natural disasters across the U.S. have been not only tragic but expensive. Hurricanes Debby, Helene and Milton, which pummeled the Southeast in 2024, caused roughly $5.4 billion in insurance losses, according to official estimates. Then, in January 2025, wildfires in Southern California resulted in another $45 billion in damages, as estimated by Irvine, Calif.-based CoreLogic.
This financial gut-punch has led some economists to predict that high-risk areas could soon become uninsurable. What are homeowners supposed to do? Is there any reasonable solution to what seems to be an intractable problem?
“All stakeholders are looking at the way forward,” said Janet Ruiz at the Insurance Information Institute, an industry-funded consumer education organization in New York City.
She cited efforts to improve infrastructure, with less disaster-prone roadways and electricity grids and water systems, as well as revamped building codes that require homes and businesses to be more resilient to fires, floods and wind gusts. But, she added, there are many challenges, including increasing climate dangers and the rising costs of construction, building supplies, temporary housing, legal protections and reinsurance. (Reinsurance is essentially insurance for insurance companies, enabling them to offset a degree of liability.)
“Many communities are taking action to become resilient to the risks they face, through planning, mitigation, grants, bonds, building codes and innovative ways to predict and prevent future loss and devastation,” she said. “Risk management, new products [and] technology are all part of the future of insurance.”
There’s certainly been no shortage of finger-pointing, as commentators have blamed the disasters on everything from environmental mismanagement to municipal malfeasance, regulatory overreach, heedless homeowners and greedy insurance companies. The wide-ranging accusations perhaps only reveal the complexity of the situation.
“A combination of changes—like making homes more resilient, reforming state programs and spreading risk more fairly—could help, but there’s no quick fix,” said Jasmine Ball, a CFP Board ambassador and founder of Bamboo Financial Partners in Tulsa, Okla.
What To Tell Clients
Meanwhile, big-picture solutions aside, many advisors are struggling to find the right words to offer clients who have lost their homes. Even those who still have a place to live can no longer find or afford home insurance. Many of the biggest carriers have pulled back from the $15 trillion market. Over the past few years, State Farm and Allstate stopped issuing new homeowner policies in California. Farmers Insurance Group, which had already ceased offering new home coverage in Florida, stopped renewing roughly a third of its existing policies there. American International Group (AIG) has limited coverage in certain ZIP Codes in California, Florida, New York, Delaware, Colorado, Montana, Idaho and Wyoming, among other states.
Steve Parrish, a professor at the American College of Financial Services, said it might take a while for homeowners to get insurance in high-risk areas. "Treat obtaining homeowners insurance in high-risk areas more as a marathon than a sprint," he said.
He recommends starting with a local insurance broker, rather than calling one of the big national carriers. Local brokers, he said, have a feel for the market, which can save a client time. Homeowners next have to find out why they are being rejected for insurance. “Find out where the deal-killers are,” he said. If your clients have a roof that’s too old, for instance, they should check to see if a roof replacement would make them eligible for coverage. “Insurers have a reason to be cautious,” he said, so homeowners should know what steps to take.
When you do find insurance, he said, it’s important to determine exactly what is covered. Some policies may cover roof repairs but not mold or flood damage, for example. “Flood insurance is a separate, expensive and important coverage to obtain,” he said.
Homeowners should also make sure their carriers are accredited. Every state has an insurance department that monitors carriers and brokers, and a guarantee program that pays legitimate claims if the insurer becomes insolvent. These state guarantees are funded by insurance companies, but only those companies that are dubbed “admitted” carriers are actually contributors to the program. If a homeowner’s carrier doesn’t have this designation, experts suggest that the homeowner should consult private rating agencies such as AM Best and J.D. Power before buying coverage.
For many homeowners, though, the last resort is to get insurance through a state-regulated Fair Access to Insurance Requirements plan, (also called a FAIR plan). These may go by different names, but they are available in every state.
“State programs are becoming the only option for many, but they can double or triple premiums, which has forced some families out of their homes,” said Ball. The state insurance programs “need reform to be more accessible and sustainable,” she added.
Still, she insists that having insurance is essential. “We’ve seen how devastating it can be for families who experience a loss without insurance—rebuilding or recovering becomes nearly impossible without it,” she said.
Why are home-insurance policies so expensive? According to industry insiders, the causes of price hikes and supply shortages are multifaceted and numerous. “Rising insurance costs are driven by a complex mix of factors,” said Jon Ward at the American Property Casualty Insurance Association in Washington, D.C.
He pointed to the impact of inflation on repairing and rebuilding costs, and the effects of extreme weather combined with rapid population growth in areas at higher risk for storms and fires. There is also legal-system abuse and regulation that “strays from its core purpose,” Ward said, referring primarily to how states manage their insurance markets.
For example, he explained, until late last year California prohibited insurance companies from basing their rates on “catastrophe models” that project disaster risk. This restricted premium increases based on climate-prediction calculations, preventing carriers from raising premiums to keep up with the ever-rising costs of claims. As a result, many large carriers quit the state.
To stop the flow of insurers leaving California, the state insurance commissioner recently rescinded the rule, allowing carriers to use catastrophe models and to price in part of their reinsurance costs. “These reforms will help California’s market recover its equilibrium,” said Ward.
In Florida, regulators were forcing insurers to accept contractors’ estimates for rebuilding costs, which he said led to a wave of lawsuits as insurers rejected contractors’ estimates as “overinflated.” Costly suits and countersuits ensued, he said, leading more than a dozen carriers to go out of business between 2020 and 2022 as litigation became too expensive.
Since then, however, legislative changes have curbed the lawsuits and helped stabilize the market, he said. As a result, 60% of the state’s top 10 carriers have now expanded their business, 40% have filed to decrease rates, and nine new insurers have begun offering coverage, according to data from Florida’s Office of Insurance Regulation.
“When regulators or politicians attempt to suppress rates artificially, that creates even bigger problems,” Ward added. Insurers, he said, should be “allowed to set rates that are commensurate with risk.”
The Future
Apparent improvements in Florida’s insurance market are a testament to the power and value of appropriate oversight, said Michael Zmistowski of the Financial Planning Association in Tampa, Fla. The state has formed a stability unit, he said—a multidisciplinary regulatory collaboration that “provides enhanced monitoring [of] insurers’ solvency, rates, proposed contracts, underwriting rules, market practices, claims handling, consumer complaints, litigation practices and outcomes, and any other issue related to compliance with the insurance code.”
Still, it’s too soon to say whether these changes will have a lasting effect. In January, official data showed that the statewide average premium for an all-perils single-family home policy had increased more than 3% in the most recent quarter, which was more than double the modest increases of the two previous quarters.
“I'd think insurance premiums in risk areas will keep going up,” said Steven Podnos at Wealth Care in Merritt Island, Fla. “I don't see an easy solution. It's a market-risk issue.”