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Affordability, Homeowners Insurance, Insurers and the Economy, Market Conditions

Bridging the Short-Term Rental Coverage Gap

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By Lewis Nibbelin, Research Writer, Triple-I

As short-term rentals grow increasingly popular, many hosts remain unaware of the added complexity and often higher costs of properly insuring them, according to Triple-I’s latest Outlook.

Though coverage needs will vary, standard homeowners’ insurance policies typically exclude losses from commercial activity, which encompasses a broader range of risks with higher corresponding premiums, the report explains. Because short-term rentals fall under commercial use, rental owners who fail to update their existing policies may face denied claims, reduced liability coverage, higher deductibles, and other serious consequences.

Operating short-term rentals in two-unit or multi-unit dwellings compounds these concerns, as uncovered incidents affect the master insurance policy shared by both the rental unit owner(s) and their neighbors. In such instances, losses can impact the policy terms, conditions, exclusions, and premiums for all residents.

Across single and multi-unit dwellings, commercial activity may violate the permit requirements and operational restrictions set by state and local laws, leading to further policy limitations and potentially cancellation or nonrenewal, the report notes. While short-term rentals most directly increase liability exposure, such policy changes may also impact coverage for physical loss or damage, content loss or damage, and loss of use.

For homeowners planning to rent out their residences, the report outlines the following steps to maintain coverage and remain adequately protected:

  • Notify their insurer: Before operating the rental, owners must contact their insurance carrier, broker, or agent, including the master policy insurance carrier if the dwelling is multi-unit.
  • Comply with policy terms: Rental owners must adhere to their existing homeowners’ policy terms, conditions, and exclusions for short-term rentals, including any restrictions on number of guests and days or nights for rental use.
  • Obtain appropriate coverage: Depending on individual circumstances, rental owners may purchase commercial property insurance, small business insurance, or short-term rental-specific coverages to protect against the commercial risks of short-term rental use. In multi-unit dwellings, all unit owners must collectively purchase new coverage.

Many insurance carriers offer short-term rental endorsements or allow rental periods on standard homeowners’ policies, though restrictions still apply. Consulting with an insurance professional to understand available coverage options is crucial to meeting the specific needs of a given rental unit.

Triple-I’s new Outlook builds on testimony from Triple-I Chief Economist and Data Scientist Dr. Michel Léonard to New York City committee members last year as they considered legislation to expand homeowners’ ability to earn income through short-term rentals. Léonard discussed the potential insurance challenges of the expansion, focusing on the pervasive protection gap among residents using their homes for commercial purposes. Neither bill successfully made it past the city council.

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Industry Financials, Market Conditions

Farmowners’ Insurance: The Trends Behind a Challenging Market

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By William Nibbelin, Senior Research Actuary, Triple-I

The U.S. farmowners’ insurance industry is navigating a difficult period, recording its third consecutive underwriting loss in 2024, with a net combined ratio of 100.7. According to Triple-I’s latest Issues Brief, this is the line’s tenth underwriting loss in the past two decades and contrasts sharply with the broader property and casualty (P/C) industry.

Combined ratio is the most common measure of insurer underwriting profitability. It is calculated by dividing the sum of the claim-related losses and expenses by premium. A ratio over 100 indicates that the industry is paying out more than it is taking in. While struggling with profitability, the farmowners’ line is seeing significant growth. Premium increases have exceeded the rest of the P/C industry for six of the past ten years.

Defining the Farmowners’ Policy

A farmowners’ policy is a specialized hybrid. Designed primarily for smaller farms, it combines the standard protections of a homeowners’ policy with specific endorsements for agricultural risks like farm structures, heavy equipment, and livestock. Larger industrial agricultural operations use more complex commercial multiline coverage.

Predictors of Premium Hikes

Because farmowners’ insurance is so tied to physical equipment and buildings, certain economic markers serve as leading indicators for where premiums are headed:

  • Machinery Repair Costs: The cost of commercial machinery maintenance has a massive 0.84 correlation with future premium changes.
  • Building Materials: The cost of materials like lumber and steel also shows a near-identical correlation of 0.85, meaning when it gets more expensive to build a barn, insurance costs inevitably follow.

The Gap Between Home and Farm

Historically, farmowners’ and homeowners’ insurance moved in tandem, but that connection is fraying. One reason for this decoupling is that national homeowners’ carriers have become much more aggressive in implementing high deductibles and strict payment schedules for roofs.

Farmowners’ policies, which are often written by smaller, regional mutual companies, have not adopted these trends as quickly. Furthermore, farmers face a unique seasonal risk during the second quarter of the year, the peak for severe convective storms. For at least 20 years, the losses for farmowners during this “storm season” have consistently surpassed those of standard homeowners.

Assessing Frequency and Severity

Analyzing exactly how often claims occur (frequency) and how much they cost (severity) is difficult because farmowners’ data is often lumped in with homeowners’ data in public reporting. However, the financial health of the farm sector may serve as a proxy to fill the gaps.

  • Frequency: A decline in a farm’s “working capital” often correlates with an increase in insurance claims, as a lack of cash can lead to the depreciation of equipment and structures.
  • Severity: The cost of individual claims is heavily influenced by inflation. There is a very high correlation of 0.94 between the cost of manufacturing farm machinery and the rising severity of insurance claims.

A Concentrated Marketplace

The farmowners’ market is considered “highly concentrated” by Department of Justice standards. Nationally, just 25 insurance carriers write 80 percent of all farmowners’ premiums.

This concentration creates “insurance deserts” in some regions. Because standard policies were built for the row crops and houses of the Midwest, they don’t always fit other landscapes. In Hawaii, for example, the reliance on leased land and permanent tree crops means that not a single carrier writes a standard farmowners’ policy. Other areas, like Arkansas and Puerto Rico, have only one insurer currently offering this specific coverage.

As we move through 2026, these trends suggest a market that is highly sensitive to both the financial health of the American farmer and the increasing volatility of spring weather patterns.

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Catastrophes, Corporate Social Responsibility, Disaster Resilience, ESG, Hurricane, Severe Convective Storm, Wildfire

Claims Leaders Take Charge on Climate-Resilient Rebuilding

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By Lewis Nibbelin, Research Writer, Triple-I

As communities nationwide rebuild after last year’s 23 billion-dollar weather and climate disasters, many must weigh the benefits of climate-resilient construction over the immediate financial burdens, logistical obstacles, and other constraints associated with recovery. Perceived cost of these building standards poses another challenge, underscoring a widespread awareness gap that impedes adoption.

A new report from Crawford & Company explores how facilitating resilient construction became a major focus among claims leaders across the globe, as part of a greater industry shift to center sustainability in claims decision-making. Based on interviews and survey responses from a cross-section of carrier and broker partner organizations, the report highlights the growing momentum to incentivize home upgrades due to their long-term cost savings, with such initiatives largely backed by insurers themselves.

“When we can collaborate at an industry level and converge on some best practices, we’re going to create a lot more benefit for the effort that we put in,” said Pat Van Bakel, the firm’s chief commercial and strategy officer, in a recent Executive Exchange with Triple-I CEO Sean Kevelighan. “My advice is to be practical: think about what we can do that is going to drive some impact and then build from there.”

Though differing economic, political, and legal pressures shape regional approaches to resilience, Van Bakel explained that “most organizations have referenced sustainability or resiliency in their corporate strategy,” with 70 percent of respondents identifying sustainability considerations as impactful in their adjudication and resolution process. Many mentioned integrating programs to make homes more resilient to severe weather, aligning with broader industry trends to prioritize sustainable restoration over replacement.

While house upgrades to voluntary FORTIFIED standards, for instance, remain relatively affordable, adoption skyrocketed under insurer-funded programs that offer homeowners grants to retrofit their roofs along such guidelines, with completed retrofits earning policyholders steep premium discounts. Developed by the Insurance Institute for Business & Home Safety (IBHS), the construction method has demonstrated success in reducing severe storm and hurricane damage, prompting a burgeoning number of state governments to help launch their own programs.

Beyond risk reduction, “what they’ve found in those areas is that the home values have started going up and the prices of insurance have started going down,” Kevelighan said, creating an “economic flywheel to incentivize people to take action.”

Similar efforts are underway in Dallas, Tex., Kevelighan added, as Triple-I works to establish “a property-based resiliency score” that homeowners can use to “tap into a revolving loan and grant fund that allows them to get the financial means” for needed home improvements.

Premium discounts are also attainable for California residents who meet specific standards for wildfire mitigation, many of whom are pursuing certification through the IBHS Wildfire Prepared Home program. Initiated by the state’s updated “Safer from Wildfires” regulations, the discounts offer some relief for the thousands of Los Angeles homes still awaiting reconstruction after last year’s devasting wildfires in the county.

Aerial images of disaster-struck areas “bring to life the value” of these initiatives, Van Bakel said, noting that “you can see the benefit of putting resiliency into the infrastructure when there’s no other way to explain how one structure can look relatively unscathed and one right next door to it is flattened or burned to the ground, depending on the peril.”

Crawford & Company’s report further emphasizes the claims industry’s role in helping “connect the dots” for policyholders on the resources available to them, including the accessibility of resilience funding and their code upgrade coverage. While 69 percent of respondents indicated sustainability is important to their customers, the demand for such measures has yet to fully translate to public education and coordinated industry support.

As insurers increasingly navigate these efforts, Van Bankel encourages the industry to “follow what I would describe as the demand pull, rather than trying to create demand, and I think we’ll be a lot more successful.”

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Industry Financials, Market Conditions, Workers Compensation

Workers’ Comp:
Quiet Overachiever
in P/C Insurance

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By William Nibbelin, Senior Research Actuary, Triple-I

While personal auto and home insurance tend to be the focus of most insurance-related headlines, workers’ compensation has quietly become a model of stability and profitability. According to Triple-I’s latest Issues Brief, 2024 marked the third-best underwriting performance for the line in two decades, with a net combined ratio of 87.8.

That’s a full decade of underwriting profit for the industry. Since 2015, workers’ comp has consistently outperformed the property and casualty (P/C) insurance market. Combined ratio is the most common measure of insurer underwriting profitability. It is calculated by dividing the sum of the claim-related losses and expenses by premium. In its simplest form, a combined ratio under 100 means the insurer is making an underwriting profit; over 100 means the insurer is paying out more than it’s taking in.

The Jobs Engine and Premium Growth

Workers’ comp premiums are tied directly to the workforce. When more people work and wages rise, premiums generally follow. Only in 2020, because of the COVID-19 pandemic, employment numbers shrank in at least 15 years. Since 2020, the years 2021 through 2024 have seen the highest year-over-year increases in payroll in over two decades. However, premiums aren’t growing as fast as they are for other types of insurance, suggesting that the cost of coverage isn’t increasing though more people are working.

Safer Workplaces

Claims “frequency” — the measure of how often they happen — has been dropping steadily at an annual compound rate of -5.6 percent from 2015 to 2024, indicating work is getting safer. However, the “severity” of claims — the average cost of each claim — has been increasing.

When compared to the overall economy (GDP), however, the average cost of claims is decreasing. Therefore, the rising costs of individual claims are being driven more by general inflation in the economy than by workplace safety getting worse.

A More Competitive Market

One measure of industry competition is market concentration, which can be determined by the Herfindahl-Hirschman Index (HHI). The higher the index, the more market share is concentrated in fewer companies, implying less competition. The workers’ comp market has become much more competitive over the last 10 years. This is partly because states are moving away from government-run systems. For example, Missouri recently privatized its state fund in early 2025. Today, only 18 states have a competitive state fund. The direct combined ratio for fully privatized states has outperformed these states eight of the last 10 years. Fortunately, the direct written premium for these competitive funds as a percentage of total workers’ comp premium has dropped from 14.9 percent in 2015 to 12.9 percent in 2024.

Learn More:

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Affordability, Legal Environment

Triple-I Legal System Abuse Awareness Campaign Enters California, Illinois

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By Lewis Nibbelin, Research Writer, Triple-I

As part of its continuing effort to highlight the impacts of legal system abuse, Triple-I has launched public awareness campaigns on the need for legal reforms in Los Angeles, Calif., and Cook County, Ill., which includes Chicago. The campaigns comprise brick-and-mortar billboards and digital scapes in high-traffic areas across both regions, all of which promote Triple-I’s updated StopLegalSystemAbuse.org microsite.

California and Illinois are perennial members of the American Tort Reform Foundation’s (ATRF) annual list of “judicial hellholes,” or jurisdictions where the organization believes legal system abuse runs rampant. Los Angeles topped its most recent list due to frequent nuclear verdicts and “novel theories of product and environmental liability” to the disadvantage of defendants, ATRF says, with Cook County ranked seventh.

A consumer guide co-authored by Triple-I and Munich Re outlines how such practices fuel rising insurance premiums and other cost burdens throughout the country, to the tune of $6,664 in added annual costs for an American family of four and 4.8 million in jobs lost nationwide. Per resident, these annual costs amount to $2,566.70 in California and just over $2,000 in Illinois, with both states losing hundreds of thousands of jobs every year.

Billboard lawyers blur reality

Attorney advertising often obfuscates this reality, implying plaintiffs win big rather than receive only a fraction of awarded damages. Triple-I’s most recent Issues Brief on legal system abuse notes that legal service providers spent $2.5 billion on millions of ads in 2024 largely to tout this messaging, which research suggests increases the number of plaintiffs in multidistrict litigation (MDL), or large, complex lawsuits consisting of multiple civil cases in different districts.

Additional research from Triple-I and the Casualty Actuarial Society (CAS) estimates that excessive litigation drove $231.6 billion to $281.2 billion in increased liability insurance losses from 2015 to 2024, a finding that economic inflation alone cannot explain. A separate Triple-I report on civil case filings reinforces the trend, revealing an estimated $42.8 billion in excess litigation value from motor vehicle tort cases filed between 2014 and 2023 in the federal and state civil courts.

Gaining momentum

Triple-I’s new campaigns build on the momentum of its parallel efforts in Georgia and Louisiana, where state lawmakers successfully passed sweeping legal system abuse reforms last year. Both states, for instance, have established greater oversight of third-party litigation funding to prevent outside investors from gaming the court system for profit. Though the reforms remain too recent to fully affect premiums, legal reforms in Florida model the kinds of subsequent market improvements these states can later expect.

Families and businesses across the country are grappling with rising costs. By distorting loss trends and propelling claims expenses, unnecessary and drawn-out litigation serves only to exacerbate the strain. Addressing these pressures requires ongoing dialogue between regulators, consumers, industry leaders, and other stakeholders to ensure fairness in the court system while supporting a stable insurance environment that keeps coverage accessible.

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Artificial Intelligence, Technology

Amid Data Boom, Actuarial Analysis Belongs in the Forefront

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By Lewis Nibbelin, Research Writer, Triple-I

Given the growing ubiquity of artificial intelligence, its practical applications may seem self-evident. But for actuaries – whose work hinges on rigorous modeling and explainable risk assessment – translating AI-driven insights into analysis may pose as many challenges as solutions. A well-defined balance between technological capability and ongoing actuarial judgement is essential to navigating this shift.

“The challenge is not that there’s too much data – it’s having an awareness of what you’re looking for and then finding it,” said Dr. Michel Léonard, Triple-I chief economist and data scientist, in a recent interview for the Casualty Actuarial Society (CAS) Institute’s Almost Nowhere podcast. “If you look at all the data and it’s not focused and translated, the signal is not going to be what you need.”

Noting that many AI models train on varied language sources, Léonard stressed that data understanding and preparation are crucial to confronting the “black box,” or opacity surrounding the training and internal decision-making processes of complex algorithms. To integrate AI into risk assessment, carriers will need to demonstrate the mechanisms and actuarial record behind the models they deploy, especially for regulators and the broader public.

Though dynamic wildfire models, for instance, “very clearly show that the risk is more frequent and severe,” ongoing transparency around how these models work will be key to building “a bridge between regulators and the industry,” Léonard said.

While such models have facilitated greater access to granular, real-time data, critical information gaps continue to impede effective risk forecasting, especially following the 2025 federal government shutdown. Beyond being the longest federal closure in U.S. history, the shutdown also delayed or left permanent gaps in crucial survey data on employment, inflation, and other economic indicators, fueling more uncertainty for decision makers heading into 2026.

“Because of this uncertainty, we’re forecasting on the trend, which means that we cannot stress test or include validation for those stress tests,” Léonard said. “The lack of data on the U.S. economy is the main challenge for us right now.”

Current tariff policies – especially those targeting materials used in repairing and replacing property after insured events – add to the ambiguity. Though insurers appeared to avoid “the worst-case scenario” of COVID-19 levels of market instability last year, strategic stockpiling of imported goods to circumvent later post-tariff prices may have obscured their full impact, Léonard explained.

A pending Supreme Court ruling will determine the future of these policies, leaving global markets and consumers braced for potentially rising costs. Yet Léonard emphasized the insurance industry’s resilience in managing such “extreme, black swan-type events,” pointing out “that’s why we have a reasonable and adequate policyholder surplus” and other assets to ensure consumers remain protected.

Listen to Podcast: Spotify, Apple, YouTube

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Disaster Preparedness, Disaster Resilience, Flood Insurance, Floods, Homeowners Insurance

Flash Floods Set Records in 2025, Inland Risk Surges

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By Lewis Nibbelin, Research Writer, Triple-I

Deadly floods swept through the United States at a record pace in 2025, triggering more flash flood warnings than any year to date. With flood events in 99 percent of U.S. counties over the past 20 years, more communities are vulnerable to flooding than ever before, especially as exposure spreads increasingly inland.

Many homeowners, however, remain unprotected from the risk, underscoring a growing coverage gap as more people move into harm’s way. A new Triple-I Issues Brief explores the insurance industry’s role in closing that gap, as well as the public outreach and mitigation investment needed to reduce losses for all co-beneficiaries of flood resilience.

Extreme weather on the rise

Floods – alongside severe convective storms and wildfires – accounted for nearly all insured global losses last year, at $98 billion of $108 billion, according to Munich Re estimates. In the United States, inland flooding from both tropical and severe convective storms caused much of the devastation, led by the unprecedented Central Texas flood that claimed more than 130 lives.

Defined by NOAA as a rapid swing between two extreme environmental conditions, “weather whiplash” is becoming increasingly frequent in states like Texas and California, where prolonged droughts collide with periods of heavy rains and flooding, amplifying their effects. Fueled by increased tropical moisture from higher ocean temperatures, these drought-to-flood/hot-to-cold transitions drove many of the 21 billion-dollar severe convective storms in 2025, more than any prior year on record.

Flood market growth continues

Many homeowners remain unaware that a standard homeowners’ policy doesn’t cover flood damage or believe flood coverage is unnecessary unless their mortgage lender requires it. A separate 2023 study from Munich Re, in collaboration with Triple-I, found 64 percent of homeowners  believed they were not at risk for flooding. It also is not uncommon for homeowners to drop flood insurance coverage once their mortgage is paid off to save money.

Though more than half of all homeowners with flood insurance are covered by FEMA’s National Flood Insurance Program (NFIP), federal regulations introduced in 2019 allowed mortgage lenders to accept private flood insurance if policies abided by regulatory definitions, steering a greater percentage of private insurers to the flood market. Between 2016 and 2024, the total flood market grew by nearly 43 percent – from $3.29 billion in direct premiums written to $4.7 billion – with 79 private companies writing just over 27 percent of the business.

Public-private partnerships are crucial

Comprehensive flood protection, however, entails more than adequate coverage. A joint study from the U.S. Chamber of Commerce and Allstate found every dollar invested in disaster resilience can save up to $33 in avoided economic costs down the line. The study emphasized the need for collective action at all levels – individual, commercial, and government – to minimize climate and weather losses.

The NFIP’s Community Rating System (CRS) is one such collaboration, which rewards homeowners with premium discounts of up to 45 percent when their communities invest in floodplain management practices exceeding the organization’s minimum standards. By incentivizing improved building codes, citizen awareness campaigns, and other mitigation initiatives, the CRS can strengthen at-risk areas while offering relief where still needed after the cancellation of programs like FEMA’s Building Resilient Infrastructure and Communities (BRIC).

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Insurance Industry, Insurers and the Economy, Reinsurance and E&S

Triple-I Features Lloyd’s in Latest Issue Brief

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A diagram of Lloyd's, depicting the integration of the 3 core groups in the marketplace: Members, Syndicates, and Managing Agents

Triple-I’s latest Issues Brief, Lloyd’s: Trends and Insights, spotlights one of the world’s leading specialist insurance and reinsurance marketplaces. The brief explains how the nearly 350-year-old platform has functioned differently from the common stand-alone model while evolving into an integral source of capacity and resilience for the global 21st-century risk landscape.

Contrary to a common misperception, Lloyd’s is not a single insurer; rather it’s a marketplace – i.e. hub, network, platform – connecting risk brokers, underwriters, and capital providers who negotiate the transfer of risk. It consists of three core groups:

  • Members: Persons or corporate entities that provide the capital that funds a syndicate.
  • Syndicates: An accounting construct with assets, liabilities, and Profit and Loss (P&L) statement segregated from those of other Lloyd’s syndicates.
  • Managing Agents: Entities appointed by syndicate members to handle underwriting and claims, as well as oversee the governance and operations on behalf of the syndicates.

The arrangement allows policies to have multiple underwriters, enabling each underwriter to  take on more risk than they would have the appetite for as a sole underwriter. As a result, complex and hard-to-place risks can be covered.

​Another distinctive feature of Lloyd’s is its capital structure, also known as the “Chain of Security.”  The brief explains how the Chain of Security is designed to provide the financial backing for all insurance policies written at Lloyd’s. As a result of this setup, the major rating agencies typically apply a single financial strength rating (FSR) to all the policies written through Lloyd’s, regardless of which syndicates participate in the policy.

Successful handling of long-tail and complex risks –  where claims may emerge decades later  –  can be vital to fostering confidence in the larger insurance industry. Throughout its long history, Lloyd’s has been called upon to absorb extreme and unexpected losses while paying claims and recapitalizing. This track record includes playing a key role in supporting U.S. economic recovery, from major disasters, such as the 1906 San Francisco earthquake, the September 11 attacks, Hurricane Katrina, and more recent hurricanes and wildfires.

Managing uncertainty in today’s fast-evolving risk landscape can require keeping abreast of interconnected threats that outpace traditional risk management strategies. Insurers and risk managers can improve the prediction and prevention of emerging threats across core strategic areas:

  • ​advancing analytics capabilities
  • strengthening capital resilience
  • collaborating across the industry

Centering these objectives, Lloyd’s cultivates channels for talent development, innovation, and new capital flows.

For example, its London Bridge 2 (LB2) platform gives institutional investors a flexible and efficient means to deploy funds into the Lloyd’s market, attracting approximately $2.5 billion in new capital since its launch in 2022. Lloyd’s education platform supports the sustainable growth of the market by equipping professionals with the insight needed to navigate the emerging risk landscape. And, Lloyd’s Lab – a product development accelerator designed to rapidly develop, test, and refine new products, concepts, and solutions – supported 48 U.S. startups, which collectively have raised $490 million to scale solutions tackling wildfire, flood, and cyber risks.

The United States is Lloyd’s largest market, accounting for roughly half of the marketplace’s global premiums. Excess and surplus underwriting accounts for over 60 percent of Lloyd’s total premiums written in the U.S. In 2024, this share worked out to $20.8 billion in surplus lines insurance capacity, approximately 16 percent of the entire U.S. surplus lines market.  Additionally, Lloyd’s gross written premiums for U.S. reinsurance totaled $9.86 billion in 2024, with the marketplace ceding around $2.9 billion annually in reinsurance premiums to U.S. reinsurers.

This special edition of the Triple-I issue brief series is part of ongoing efforts to educate and raise awareness about how insurance market participants support coverage affordability and availability.

Homeowners Insurance, Insurers and the Economy, Legal Environment

Take Care in Addressing Homeowners’ Premiums, Bloomberg Cautions Policymakers

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By Jeff Dunsavage, Senior Research Analyst, Triple-I

While rising homeowners’ insurance can be a problem for some consumers, a recent Bloomberg editorial cautions policymakers against pursuing “simplistic solutions, such as capping premiums, subsidizing homebuyers, or punishing investors.”

Instead, it recommends taking steps to increase investment in catastrophe resilience and mitigate claim cost drivers, such as legal system abuse.

Bloomberg attributes slumping condominium prices and rising rents, in part, to increasing homeowners’ insurance premiums.

“Average homeowners insurance premiums rose almost 25 percent from 2019 to 2024 in real terms,” the editorial says. While politicians “have been quick to blame greedy insurers,” the reality is more complicated. Contributing factors include:

  • Increasingly costly disasters – evidenced by a sharp increase in billion-dollar catastrophes. In 2025, Bloomberg says, insured losses from such calamities reached $108 billion.
  • Insufficient investment by states in disaster resilience measures, “such as retrofitting public works and enforcing appropriate building codes”.
  • Escalating legal costs that are passed on to homeowners.

“In many states,” Bloomberg says, “underwriters must contend with laws that favor plaintiffs, outsized jury awards, and a proliferation of funds that specialize in financing lawsuits. Research suggests that such costs have been the single biggest driver of premium increases in recent years.”

Also feeding higher premiums are increased replacement costs related to record inflation during and since the COVID-19 pandemic.

In attempts to address these rising costs, several states in recent years have introduced legislative measures that would do more harm to homebuyers than good. Illinois insurers last year narrowly avoided increased government involvement in insurance pricing as state legislators rejected “an extreme prior-approval system found nowhere else in the country,” according to a joint statement from the American Property Casualty Insurance Association, the National Association of Mutual Insurance Companies, and the Illinois Insurance Association.

When California tried to artificially suppress premiums, “underwriters fled the market and left homeowners and the state’s insurer of last resort exposed to last year’s horrific wildfires”.  Since then, the state has allowed significant premium rate increases to lure insurers back.

Bloomberg recommends that states start by prioritizing the resilience of buildings and public works.

“Tax breaks and grants for hardening homes against floods, fire, and wind are a short‑term expense with long‑term benefits,” the editorial says, citing research that found communities lose as much as $33 in future economic activity for every $1 not invested in preparedness.

“The federal government, for its part, should commit to restoring FEMA’s pre‑disaster mitigation program and similar efforts,” Bloomberg says. “With strong oversight, such investment can protect property, limit job losses, accelerate rebuilding, reduce premiums, improve public health, and ultimately save money and lives.”

When it comes to litigation trends that put upward pressure on claim costs and, ultimately, premium rates, Florida offers an encouraging example.

“In 2021, the state was home to 6.9 percent of homeowner claims but 76 percent of the lawsuits against insurers,” Bloomberg says. “State lawmakers enacted reforms over the next two years that limited plaintiffs’ ability to allege negligence and recoup expenses, with significant results: At least 17 new insurers entered the market and dozens reduced premiums.”

Triple-I, its members, and its partners have long been engaged in helping policymakers and the public understand the forces that affect insurance affordability and availability and how they can help mitigate the factors that drive up costs.  

“It’s refreshing to see this type of thoughtful analysis of the homeowners’ insurance market by an authoritative financial news organization like Bloomberg,” said Triple-I CEO Sean Kevelighan.  “Consumers and policymakers need to understand that higher premiums are a symptom of the current risk environment, not its cause.”

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Disaster Preparedness, Regulation, Terrorism Risk

TRIA Reauthorization Bill Advances to the House

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By Lewis Nibbelin, Research Writer, Triple-I

A bill that would extend the Terrorism Risk Insurance Act (TRIA) through 2034 recently cleared a U.S. House committee with strong bipartisan support, offering hope for the program’s renewal later this year.

Enacted in 2002 after the Sept. 11, 2001, attacks, TRIA created a federal backstop that shares catastrophic terrorism losses between insurers and the government, allowing private insurance markets and other industries to remain stable while absorbing such events. Congress has reauthorized TRIA four times since its inception, and no events have yet triggered the backstop.

With TRIA scheduled to expire at the end of 2027, many commercial property/casualty insurers are already preparing for the program’s potential lapse, driving risk and insurance leaders to urge proactive legislation ensuring its continuation.

“American businesses must be provided with the essential coverage to successfully operate in today’s uncertain global environment,” said Will Melofchik, CEO of the National Conference of Insurance Legislators, in a statement on the bill last year. “Failure by Congress to extend TRIA would likely result in the inability of insurers to offer coverage for future catastrophes resulting from terrorism, making terrorism risk insurance unavailable and unaffordable.”

Testifying on behalf of the National Association of Insurance Commissioners (NAIC), former Connecticut Insurance Commissioner and NAIC past president Andrew N. Mais said, “Businesses and consumers that live, work, and shop in communities in every state benefit from a stable insurance sector, which provides commercial terrorism insurance only because TRIA exists as a backstop.”

“Absent TRIA or a similar solution, we do not believe private insurance carriers would make meaningful capacity for affordable commercial terrorism coverage available,” Mais added.

Though the bill may evolve as it passes through the full House and Senate, it currently would raise the minimum loss threshold of $5 million to $10 million in 2029, as well as introduce a transparency measure that requires the Treasury Department to publish a notice in the Federal Register no less than 30 days after beginning the terrorism determination process.

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