BRUSH Current Market and 2024-25 Community Association Insurance Forecast
Michael Berg, CMCA, CIRMS, Berg Insurance Agency and Richard Williamson, Secretary at San Lorenzo & Stadium Lofts Community Associations
“Brush” is quite possibly the ugliest and most damaging word to ever hit the California association insurance market. This is the time of year associations work on their next fiscal year budgets, so it seems timely to provide information on what is being said and trends happening now and what to expect in 2024 and 2025. Managers can take this with them to Board meetings or forward to the Boards of Directors they work with.
Brush / Wildfire Exposures It is no longer a secret that associations with brush exposures have become a nightmare for insurance agents, managers, and management companies. The annual premiums some residential condominiums face are so large no one would have thought it possible three plus years ago. For more than the last seven years, California has not had a single year of calm. Wildfires caused tens of billions of dollars in property claims. In 2018, the insurance market was turned upside down when the Camp fire in Butte County destroyed more than 18,000 separate structures (mostly single-family homes) in a brush fire conflagration. This singular event will most likely cost more than $2 billion to replace what was lost.
Statewide, wildfire damage during the last seven years continues to create turmoil in the insurance market. The Coronado Pointe fire in Laguna Niguel destroyed more than 20 multi-million- dollar homes. Although Fire Department resources were less than two miles away, they still could not reach the location quickly enough and with enough equipment and firefighters to save many of the homes in the affected neighborhood. This fire is just one example of how quickly a fire can spread or climb up a hillside. Both primary insurers and reinsurers have been hit hard by repeated losses and consequently, the property side of the association market has become very restrictive in pricing as well as underwriting.
16 July | August 2024
Although this article focuses on brush, it is vitally important to understand other catastrophic losses across the United States have increased industry losses making the challenge of insuring associations and homeowners more difficult. Wind, hail, tornado, hurricane, and flooding claims have also caused tens of billions of dollars in property losses. Hurricane Ian’s price tag, now over $50 billion, will almost certainly raise rates for several years as claims are filed and paid.
Risk Meter / Core Logic / Carrier Specific Wildfire Tools Insurancecompanies allhavetheir owntools to assess locations for risk. Outside of insurance companies, Risk Meter and Core Logic are two such companies, with Risk Meter the most prominent. At the end of the day, there is not a major difference between tools and models when assessing most locations. However, there are some exceptions as seen when one or two insurance companies will provide a quote and all others have declined. Below is a list of what these wildfire tools tell underwriters:
1. Data on how many fires have burned within five miles of the location in the last ten years.
2. Distance from building(s) to what is considered high hazard brush exposures
3. Distance from building(s) to what is considered very high hazard brush exposures
4. Historical wind patterns in the area 5. Proximity and number of fire department resources to the location
6. Sufficient information for underwriters to provide or decline an insurance quote.
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