Louisiana’s Senate passed five tort reform bills last week to curb legal system abuse driven by billboard attorneys in the Pelican State. The legislative success represents the culmination of sustained advocacy efforts – including a Triple-I-backed awareness campaign, StopLegalSystemAbuse.org – to build public support.
The new legislation addresses Louisiana’s longstanding challenges with high insurance premiums and the state’s reputation for being plaintiff-friendly in civil litigation. The reforms include stricter limits on damages, clearer standards for expert testimony, and other procedural changes designed to restore balance to the courts while reducing financial burdens on Louisiana families and businesses.
However, an additional measure intended to change state regulations for approving rate filings for auto and home insurance overshadowed the positive actions taken by lawmakers, the Times-Picayune reported.
House Bill 431, which would prevent drivers who are at least 51 percent at fault in an accident from receiving any compensation for their own injuries, requires final House approval due to Senate amendments. So do Senate Bill 231, which would allow insurers’ lawyers to present jurors with the actual amount paid for medical bills, rather than the total billed, and House Bill 436, which would ban undocumented immigrants injured in car accidents from receiving general (non-economic) damages.
House Bill 434, which would increase the threshold from $15,000 to $100,000 for uninsured drivers to collect medical expenses for bodily injuries in accidents, and House Bill 450, which would require plaintiffs in car accident lawsuits to prove their injuries were actually caused by the accident, are awaiting Gov. Jeff Landry’s signature.
Wildfire risk is strongly conditioned by geographic considerations that vary widely among and within states. The latest Triple-I Issues Brief shows how that fact played out in 2024 and early this year and discusses the importance of granular local data for underwriting and pricing insurance in wildfire-prone areas, as well as for much-needed investment in resilience.
The 2024 wildfire season in the South and Southwest was particularly severe, marked by such events as the Texas and Oklahoma Panhandle fires in February and March and significant blazes in Arizona and New Mexico. The Southwest accounted for the largest number of residential structures destroyed by wildfire, and three of the top five areas for homes destroyed were in the South.
California accounted for the largest number of homes at risk for extreme wildfires. In the first half, the state experienced an above-average number of fires, though most were contained before growing to “major incident” size. Subsequent rains suppressed subsequent wildfire conditions – and caused substantial flooding.
But this rain contributed to an accumulation of fuels so that, when hurricane-force Santa Ana winds whipped through Los Angeles County in early January 2025, the conditions were right for fast-moving blazes to tear through Pacific Palisades and Eaton Canyon.
Temperature, humidity, wind, and topography vary too widely for a single “one size fits all” mitigation approach. This underscores the importance of granular data gathering and scrupulous analysis when underwriting and pricing insurance. It is also important that insurers proactively engage with diverse stakeholder groups to promote investment in mitigation and resilience.
A recent paper by Triple-I and Guidewire – a provider of software solutions to the insurance industry – uses case studies from three California areas with very different geographic and demographic characteristics to go deeper into how such tools can be used to identify properties with attractive risk properties, despite their location in wildfire-prone areas.
By William Nibbelin, Senior Research Actuary, Triple-I
The U.S. P&C insurance industry’s financial outcomes for 2024 revealed a net combined ratio (NCR) of 96.6, demonstrating a substantial 5.1-point enhancement compared to the prior year and representing the sector’s most favorable underwriting performance since 2013, as detailed in a recent report by Triple-I and Milliman.
However, this progress faces potential impediments. The economic repercussions from early 2025 California wildfire losses, in conjunction with the unfolding influence of tariff policies, introduce factors that could dampen the industry’s performance throughout 2025 and possibly counterbalance the recent positive trajectory.
Noteworthy 2024 performance indicators:
The disparity in profitability between personal and commercial lines diminished, with both segments achieving an NCR below 100 for the year.
Personal auto insurers reported a 2024 NCR of 95.3, marking a considerable 9.6-point year-over-year improvement. This advancement was largely attributable to robust net written premium (NWP) expansion, with growth rates of 14.4 percent in 2023 and 12.8 percent in 2024.
Homeowners’ insurance experienced an 11.2-point improvement from 2023, as reflected in a 2024 NCR of 99.7. This represents the first instance of an NCR below 100 since 2019. Furthermore, the NWP growth rate reached 13.6 percent, surpassing the 12.4 percent growth observed in 2023 and achieving the highest level in over 15 years.
Impending challenges and market pressures:
The general liability segment is encountering increased financial strain, as evidenced by the least favorable NCR since 2016 and the third worst since 2010.
Early forecasts for the first quarter of 2025 suggest that the P&C industry may face its most challenging first-quarter results in over 15 years due to the extensive losses from the January 2025 Los Angeles wildfires.
The imposition of tariffs, effective as of early May 2025, is beginning to exert pressure on fundamental growth metrics and is contributing to the escalation of replacement costs across various insurance lines, initially with personal auto, and subsequently affecting homeowners and renters, commercial auto, and commercial property.
Economic dynamics and trends
Triple-I’s chief economist and data scientist, Michel Léonard, Ph.D., CBE, pointed out that P&C underlying economic growth in 2025 has doubled the growth of the U.S. GDP, with the former at 5 percent and the latter at 2.5 percent year-over-year.
In addition, it is anticipated that P&C replacement costs will not increase as quickly as the U.S. Consumer Price Index (CPI), with projected rates of 1.0 percent, compared to 2.0 percent year over year.
However, Léonard offered a cautionary perspective, stating, “While P&C economic drivers continue to outperform the broader U.S. economy—with stronger growth and lower replacement cost inflation—we now anticipate a shift in 2025 due to ongoing and expanded tariffs”.
He further elaborated on the potential adverse effects of tariffs: “These headwinds are expected to slow the sector’s momentum, potentially leading to a contraction later in the year that could exceed the overall GDP slowdown. Additionally, replacement costs, initially projected to rise more slowly than CPI, may accelerate and begin to outpace it, adding further pressure. Even though rising costs may lead to additional premium increases, these will likely be insufficient to offset slowing consumer spending and corporate investment.”
He explained how the timing of tariff impacts is staggered due to inventory management behavior, with the full effect of current tariffs yet to be realized.
Underwriting context and projections
Dale Porfilio, Chief Insurance Officer at Triple-I, attributes the notable 2024 turnaround in personal lines to the hard market conditions that allowed for necessary premium adjustments, rather than a decrease in incurred losses, which remained nearly flat. However, some upward pressure on the combined ratio is expected for 2025, reflecting tariff impacts and increased acquisition expenses. A deeper look into personal auto trends reveals that physical damage loss ratios have been improving rapidly, while liability coverage improvements have plateaued, raising concerns about legal system abuse and liability coverage responsiveness.
Homeowners’ insurance improvements were also driven primarily by premium increases, though a 2.5 percent decrease in net incurred losses, mainly from catastrophes, contributed. However, the 2025 outlook for homeowners is heavily influenced by the Los Angeles wildfires, with projections indicating that Q1 2025 could be the worst first quarter for the P&C industry in over 15 years. Current estimates suggest that the 2025 wildfires may lead to the costliest wildfire losses in U.S. history.
Jason B. Kurtz, FCAS, MAAA, a principal and consulting actuary at Milliman, emphasized the persistent negative influence of adverse prior year development (PYD) on the profitability of commercial auto and general liability lines, noting that this trend has been observed for three consecutive years.
In discussing general liability, Kurtz pointed out the substantial reserve strengthening undertaken during 2024.
“The 2024 net combined ratio of 110 included a staggering nine points of adverse prior year development, amounting to more than $9 billion of reserve strengthening, the highest seen in at least 15 years,” Kurtz said. “It is also concerning that the hard-market years 2020-2023, which saw significant rate increases, are also seeing reserve increases.”
Conversely, workers compensation combined ratios continued to benefit from favorable PYD for the eighth consecutive year, indicating sustained underwriting profitability.
Donna Glenn, FCAS, MAAA, chief actuary at the National Council on Compensation Insurance (NCCI), presented an overview of the year’s average loss cost level changes and provided insights into the long-term financial stability of the workers compensation system.
“The workers compensation system continues an era of exceptional performance with strong results and a financially healthy line,” said Glenn. “And while there are early indications of potential headwinds on the horizon, the industry is positioned well to navigate these challenges.”
*Note: Insurance Economics and Underwriting Projections: A Forward View is a quarterly report available exclusively to Triple-I members and Milliman customers.
As high-severity natural catastrophes – wildfires, floods, hurricanes, and others – become more frequent and more people move into riskier locales, insurance affordability and availability have become a challenge in many states.
Insurers underwrite and price coverage based on the risks they’re assuming, and rising premiums in these states have pushed more homeowners into residual market mechanisms, such as state-backed insurance pools or agencies. Reliance on these funds – which often provide more limited coverage at higher costs – is not sustainable in the long term.
To ensure market stability and continued insurance availability and affordability, insurers must leverage more granular and dynamic risk models that account for real-time environmental conditions, mitigation measures, and property-specific characteristics. A new paper by Triple-I and Guidewire – a provider of software solutions to the insurance industry – uses case studies from three California areas with very different geographic and demographic characteristics to show how such tools can be used to identify properties with attractive risk properties, despite their location in wildfire-prone areas.
California’s risk profile
In addition to its particular risk characteristics, California’s insurance challenge is exacerbated by a 1988 measure – Proposition 103 – that has constrained insurers’ ability to profitably insure property in the state. In a dynamically evolving risk environment that includes earthquakes, drought, wildfire, landslides, and damaging floods, regulatory interpretation of Proposition 103 has made it hard for some insurers to offer coverage in the state.
In some cases, this has led to insurers limiting or reducing their business in the state. With fewer private insurance options available, more Californians are resorting to the state’s FAIR Plan, which offers less coverage for a higher premium. For many, this “insurer of last resort” has become the insurer of first resort. This isn’t a tenable situation for the state or its policyholders. California’s insurance availability/affordability challenges will require a multi-pronged approach, and underlying every component is the need for granular, high-quality, reliable data.
Modeling based on granular data
Guidewire’s analysis, based on its HazardHub Wildfire Score, has shown that wildfire mitigation and home hardening can reduce wildfire damage by as much as 70 percent. But identifying less risky lots in such areas is no easy task.
“Every property being assessed for wildfire risk is unique,” the report says. “Therefore, it’s important to subject as many relevant variables as possible to analysis. For example, proximity of structures to fuel is important – but, to be more predictive, it helps to know more: What kind of fuel? Is there potential for a wind-driven event? Is the property on a hill? If so, is it north-facing?”
Guidewire’s model includes standard variables, such as slope, aspect, wildfire history, wind, and the amount of nearby vegetation. It also includes differentiators like vegetation type and fire-suppression success rate.
“The traditional approach to wildfire risk assessment has left many Californians without access to affordable property insurance coverage,” said Triple-I Chief Insurance Officer Dale Porfilio. “Our research shows that with more detailed, property-level analysis, insurers can confidently offer coverage in areas previously deemed too risky.”
Important moves by California
California has taken steps to address regulatory obstacles to fair, actuarially sound insurance underwriting and pricing – most notably, the state’s Sustainable Insurance Strategy, an ambitious plan released by Insurance Commissioner Ricardo Lara in 2023 plan aimed at safeguarding the health of the insurance market while ensuring long-term sustainability. A key component of the plan is a requirement that insurers writing homeowners coverage in the state write no less than 85 percent of their statewide market share in areas identified by the commissioner as “under-marketed.”
Tightly focused, data-driven analysis using tools like the HazardHub Wildfire Score, can go a long way toward helping insurers meet those requirements by identifying less risky parcels in undermarketed areas.
“The Triple-I analysis highlights how next-generation tools and data can uncover lower-risk properties – even in high-risk areas – empowering insurers to expand coverage confidently and responsibly,” said Leo Tenenblat, Senior Vice President and General Manager, Data and Analytics at Guidewire.
The Florida House’s attempt to curtail recent legal system reforms met firm resistance from the state Senate this week, preserving the 2022 and 2023 legislation that stabilized the state’s property insurance market.
Aiming to reinstate one-way attorney fees in insurance litigation, the House added an amendment – originally part of a separate bill – to an unrelated Senate bill focused on creating legal protections for owners of former mining sites.
Filed by state Rep. Berny Jacques, the amendment would have restored Florida’s previous requirement for insurers to shoulder the insured’s legal costs, even if the insured’s jury award was only slightly higher than the settlement insurers offered. Current law stipulates that each side is responsible for their own fees.
Senate members refused to concur with the proposal and sent the bill back to the House, which can either remove Jacques’ amendment or let the entire bill die.
Insurers and policyholders benefit
Jacques’ amendment prompted instant criticism from industry leaders, notably Florida Insurance Commissioner Michael Yaworsky, who sent an email warning the governor’s legislative affairs director that it would dismantle “hard-won progress” achieved by the 2022-2023 reforms, according to a report by the South Florida Sun Sentinel.
That progress includes the introduction of 12 new insurers into Florida’s property sector after a multi-year exodus and a 23 percent decrease in lawsuit filings year over year, Yaworsky wrote.
Proponents of Jacques’ amendment argued it would return balance to the legal system, which had overcorrected to favor insurance companies at the expense of consumers.
Yet, in 2019, Florida accounted for just over 8 percent of U.S. homeowners insurance claims, but more than 76 percent of U.S. property claim lawsuits, pushing premium rates up to three times the national average. Post-reform, in 2024, 40 percent of all insurers in the state filed for rate decreases, with average home insurance premiums down 5.6 percent at the start of this year.
Reversing these reforms would reinvigorate fraudulent and unnecessary lawsuits, increasing insurer costs and, consequently, premium rates. Dulce Suarez-Resnick, an insurance agent based in Miami, told the Sun Sentinel that supporters predicted reforms wouldn’t be felt for three years.
“We are two years in, and I’ve already seen a lot of impact,” Suarez-Resnick said. “The Legislature needs to be patient. We have one more year to go.”
Reforms expected to remain intact
Though Florida’s 2025 legislative session was extended, the House has little time to push for further changes to the reforms. Even if the Senate somehow acquiesces and passes the amended bill, it is unlikely to survive – Gov. Ron DeSantis has vowed to veto any bill targeting tort reform and publicly condemned the House’s efforts to roll it back.
And Florida isn’t alone: Georgia successfully passed its own comprehensive tort reform package last month, after plaintiffs’ attorneys began transferring their marketing tactics to the neighboring state. State government moves like these are essential to eradicating legal system abuse and protecting all stakeholders from rising costs.
Established by Congress through the Disaster Recovery Reform Act of 2018, the BRIC program has allocated more than $5 billion for investment in mitigation projects to reduce economic losses from floods, wildfires, and other disasters for hundreds of communities. Ending BRIC will cancel all applications from 2020-2023 and rescind more than $185 million in grants intended for Louisiana, leaving the 34 submitted and accepted projects funded by those grants in limbo.
Whereas the FEMA press release described BRIC as “wasteful and ineffective,” Cassidy identified “not doing the program and then having to rescue communities when the inevitable flood occurs – that is waste, because we could have prevented that from happening in the first place.”
A 2024 study backed by the U.S. Chamber of Commerce supports this claim, which found that disaster mitigation investments save $13 in benefits for every dollar spent.
FEMA’s decision coincides with recovery efforts in Natchitoches, a small Louisiana city, after flash flooding inundated homes and downed power lines just weeks before. BRIC was set to fund improvements to the city’s backup generator system to pump out floodwater during severe weather.
Similarly, Lafourche Parish will lose $20 million to strengthen 16 miles of power lines, which Cassidy noted toppled “like dominos” during last year’s Hurricane Francine. Jefferson Parish residents displaced following Hurricane Ida in 2021 will lose the home elevation disaster grants they finally secured earlier this year.
“Louisiana was the third-largest recipient of BRIC’s most recent round of funding and is the largest recipient on a per capita basis,” Cassidy said. “Without BRIC, none of these projects would be possible.”
A national problem
Beyond Louisiana, Cassidy pointed to numerous states ravaged by severe storms so far this year, particularly inland communities where flooding is traditionally unexpected. At least 25 people died amid a severe weather outbreak across the southern and midwestern U.S. last month, underscoring a growing need for resiliency planning in non-coastal areas.
BRIC is one of many programs facing sudden termination under the Trump Administration. Twenty-two states and the District of Columbia have filed a lawsuit demanding the federal government unfreeze essential funding, including BRIC grants. Though the administration is reportedly complying with a federal judge’s order blocking the freeze, the states involved claim funding remains inaccessible.
Louisiana has not joined the lawsuit, but Cassidy emphasized the congressional appropriation of the program and requested the fulfillment of preexisting BRIC applications. He argued that “to do anything other than use that money to fund flood mitigation projects is to thwart the will of Congress.”
As President Trump weighs disbanding FEMA entirely – even as FEMA responds to record-breaking numbers of billion-dollar disasters – it is imperative to recognize the vast co-beneficiary benefits of disaster resilience, and develop our partnerships across these stakeholder groups.
The Institutes’ Pete Miller and Francis Bouchard of Marsh McLennan discuss how AI is transforming property/casualty insurance as the industry attacks theclimate crisis.
“Climate” is not a popular word in Washington, D.C., today, so it would take a certain audacity to hold an event whose title prominently includes it in the heart of the U.S. Capitol.
For two days, expert panels at the Ronald Reagan Building and International Trade Center discussed climate-related risks – from flood, wind, and wildfire to extreme heat and cold – and the role of technology in mitigating and building resilience against them. Given the human and financial costs associated with climate risks, it was appropriate to see the property/casualty insurance industry strongly represented.
Peter Miller, CEO of The Institutes, was on hand to talk about the transformative power of AI for insurers, and Triple-I President and CEO Sean Kevelighan discussed – among other things – the collaborative work his organization and its insurance industry members are doing in partnership with governments, non-profits, and others to promote investment in climate resilience. Triple-I is an affiliate of the Institutes.
Sean Kevelighan of Triple-I and Denise Garth, Majesco’s chief strategy officer, discuss how to ensure equitable coverage against climate events.
You can get an idea of the scope and depth of these panels by looking at the agenda, which included titles like:
Building Climate-Resilient Futures: Innovations in Insurance, Finance, and Real Estate;
Fire, Flood, and Wind: Harnessing the Power of Advanced Data-Driven Technology for Climate Resilience;
The Role of Technology and Innovation to Advance Climate Resilience Across our Cities, States and Communities;
Pioneers of Parametric: Navigating Risks with Parametric Insurance Innovations;
Climate in the Crosshairs: How Reinsurers and Investors are Redefining Risk; and
Safeguarding Tomorrow: The Regulator’s Role in Climate Resilience.
As expected, the panels and “fireside chats” went deep into the role of technology; but the importance of partnership, collaboration, and investment across stakeholder groups was a dominant theme for all participants. Coming as the Trump Administration takes such steps as eliminating FEMA’s Building Resilient Infrastructure and Communities (BRIC) program; slashing budgets of federal entities like the National Oceanographic and Atmospheric Administration (NOAA) and the National Weather Service (NWS); and revoking FEMA funding for communities still recovering from last year’s devastation from Hurricane Helene, these discussions were, to say the least, timely.
Helge Joergensen, co-founder and CEO of 7Analytics, talks about using granular data to assess and address flood risk.
In addition to the panels, the event featured a series of “Shark Tank”-style presentations by Insurtechs that got to pitch their products and services to the audience of approximately 500 attendees. A Triple-I member – Norway-based 7Analytics, a provider of granular flood and landslide data – won the competition.
Earth Day 2025 is a good time to recognize organizations that are working hard and investing in climate-risk mitigation and resilience – and to recommit to these efforts for the coming years. What better place to do so than walking distance from both the White House and the Capitol?
The Trump Administration’s unwinding of the Building Resilient Infrastructure and Communities (BRIC) program and cancellation of all BRIC applications from fiscal years 2020-2023 reinforce the need for collaboration among state and local government and private-sector stakeholders in climate resilience investment.
Congress established BRIC through the Disaster Recovery Reform Act of 2018 to ensure a stable funding source to support mitigation projects annually. The program has allocated more than $5 billion for investment in mitigation projects to alleviate human suffering and avoid economic losses from floods, wildfires, and other disasters. FEMA announced on April 4 that it is ending BRIC .
Chad Berginnis, executive director of the Association of State Floodplain Managers (ASFPM), called the decision “beyond reckless.”
“Although ASFPM has had some qualms about how FEMA’s BRIC program was implemented, it was still a cornerstone of our nation’s hazard mitigation strategy, and the agency has worked to make improvements each year,” Berginnis said. “Eliminating it entirely — mid-award cycle, no less — defies common sense.”
While the FEMA press release called BRIC a “wasteful, politicized grant program,” Berginnis said investments in hazard mitigation programs “are the opposite of ‘wasteful.’ “ He pointed to a study by the National Institute of Building Sciences (NIBS) that showed flood hazard mitigation investments return up to $8 in benefits for every $1 spent.
“At this very moment, when states like Arkansas, Kentucky, and Tennessee are grappling with major flooding, the Administration’s decision to walk away from BRIC is hard to understand,” Berginnis said.
Heading into hurricane season
Especially hard hit will be catastrophe-prone Florida. Nearly $300 million in federal aid meant to help protect communities from flooding, hurricanes, and other natural disasters has been frozen since President Trump took office in January, according to an article in Government Technology.
The loss of BRIC funding leaves dozens of Florida projects in limbo, from a plan to raise roads in St. Augustine to a $150 million effort to strengthen canals in South Florida. According to Government Technology, the agency most impacted is the South Florida Water Management District, responsible for maintaining water quality, controlling the water supply, ecosystem restoration and flood control in a 16-county area that runs from Orlando south to the Keys.
“The district received only $6 million of its $150 million grant before the program was canceled,” the article said. “The money was intended to help build three structures on canals and basins in North Miami -Dade and Broward counties to improve flood mitigation.”
Florida’s Division of Emergency Management must return $36.9 million in BRIC money that was earmarked for management costs and technical assistance. Jacksonville will lose $24.9 million targeted to raise roads and make improvements to a water reclamation facility.
FEMA announced the decision to end BRIC the day after Colorado State University’s (CSU) Department of Atmospheric Science released a forecast projecting an above-average Atlantic hurricane season for 2025. Led by CSU senior research scientist and Triple-I non-resident scholar Phil Klotzbach CSU research team forecasts 17 named storms, nine hurricanes – four of them “major” (Category 3, 4, or 5). A typical season has 14 named storms, seven hurricanes – three of them major.
Nationwide impacts
More than $280 million in federal funding for flood protection and climate resilience projects across New York City — “including critical upgrades in Central Harlem, East Elmhurst, and the South Street Seaport” – is now at risk, according to an article in AMNY. The cuts affect over $325 million in pending projects statewide and another $56 million of projects where work has already begun.
Senate Majority Leader Chuck Schumer and Gov. Kathy Hochul warned that the move jeopardizes public safety as climate-driven disasters become more frequent and severe.
“In the last few years, New Yorkers have faced hurricanes, tornadoes, blizzards, wildfires, and even an earthquake – and FEMA assistance has been critical to help us rebuild,” Hochul said. “Cutting funding for communities across New York is short-sighted and a massive risk to public safety.”
According to the National Association of Counties, cancellation of BRIC funding has several implications for counties, including paused or canceled projects, budget and planning adjustments, and reduced capacity for long-term risk reduction.
North Dakota, for example, has 10 projects that were authorized for federal funding. Those dollars will now be rescinded. Impacted projects include $7.1 million for a water intake project in Washburn; $7.8 million for a regional wastewater treatment project in Lincoln; and $1.9 million for a wastewater lagoon project in Fessenden.
“This is devastating for our community,” said Tammy Roehrich, emergency manager for Wells County. “Two million dollars to a little community of 450 people is huge.”
The cancellation of BRIC roughly coincides with FEMA’s decision to deny North Carolina’s request to continue matching 100 percent of the state’s spending on Hurricane Helene recovery.
“The need in western North Carolina remains immense — people need debris removed, homes rebuilt, and roads restored,” said Gov. Josh Stein. “Six months later, the people of western North Carolina are working hard to get back on their feet; they need FEMA to help them get the job done.”
Resilience key to insurance availability
Average insured catastrophe losses have been on the rise for decades, reflecting a combination of climate-related factors and demographic trends as more people have moved into harm’s way.
“Investing in the resilience of homes, businesses, and communities is the most proactive strategy to reducing the damage caused by climate,” said Triple-I Chief Insurance Officer Dale Porfilio. “Defunding federal resilience grants will slow the essential investments being made by communities across the U.S.”
Flood is a particularly pressing problem, as 90 percent of natural disasters involve flooding, according to the National Flood Insurance Program (NFIP). The devastation wrought by Hurricane Helene in 2024 across a 500-mile swath of the U.S. Southeast – including Florida, Georgia, the Carolinas, Virginia, and Tennessee – highlighted the growing vulnerability of inland areas to flooding from both tropical and severe convective storms, as well as the scale of the flood-protection gap in non-coastal areas.
Coastal flooding in the U.S. now occurs three times more frequently than 30 years ago, and this acceleration shows no signs of slowing, according to recent research. By 2050, flood frequency is projected to increase tenfold compared to current levels, driven by rising sea levels that push tides and storm surges higher and further inland.
In addition to the movement of more people and property into harm’s way, climate-related risks are exacerbated by inflation (which drives up the cost of repairing and replacing damaged property); legal system abuse, (which delays claim settlements and drives up insurance premium rates); and antiquated regulations (like California’s Proposition 103) that discourage insurers from writing business in the states subject to them.
Thanks to the engagement and collaboration of a range of stakeholders, some of these factors in some states are being addressed. Others – for example, improved building and zoning codes that could help reduce losses and improve insurance affordability – have met persistent local resistance.
As frequently reported on this blog, the property/casualty insurance industry has been working hard with governments, communities, businesses, and others to address the causes of high costs and the insurance affordability and availability challenges that flow from them. Triple-I, its members, and partners are involved in several of these efforts, which we’ll be reporting on here as they progress.
Even as California moves to address regulatory obstacles to fair, actuarially sound insurance underwriting and pricing, the state’s risk profile continues to evolve in ways that impede progress, according to the most recent Triple-I Issues Brief.
Like many states, California has suffered greatly from climate-related natural catastrophe losses. Like some disaster-prone states, it also has experienced a decline in insurers’ appetite for covering its property/casualty risks.
But much of California’s problem is driven by regulators’ application of Proposition 103 – a decades-old measure that constrains insurers’ ability to profitably write business in the state. As applied, Proposition 103 has:
Kept insurers from pricing catastrophe risk prospectively using models, requiring them to price based on historical data alone;
Barred insurers from incorporating reinsurance costs into pricing; and
Allowed consumer advocacy groups to intervene in the rate-approval process, making it hard for insurers to respond quickly to changing market conditions and driving up administration costs.
As insurers have adjusted their risk appetite to reflect these constraints, more property owners have been pushed into the California FAIR plan – the state’s property insurer of last resort. As of December 2024, the FAIR plan’s exposure was $529 billion – a 15 percent increase since September 2024 (the prior fiscal year end) and a 217 percent increase since fiscal year end 2021. In 2025, that exposure will increase further as FAIR begins offering higher commercial coverage for larger homeowners, condominium associations, homebuilders and other businesses.
Insurance Commissioner Ricardo Lara has implemented a Sustainable Insurance Strategy to alleviate these pressures. The strategy has generated positive impacts, but it continues to meet resistance from legislators and consumer groups. And, regardless of what regulators or legislators do, California homeowners’ insurance premiums will need to rise.
The Triple-I brief points out that – despite the Golden State’s many challenges – its homeowners actually enjoy below-average home and auto insurance rates as a percentage of median income. Insurance availability ultimately depends on insurers being able to charge rates that adequately reflect the full impact of increasing climate risk in the state. In a disaster-prone state like California, these artificially low premium rates are not sustainable.
“Higher rates and reduced regulatory restrictions will allow more carriers to expand their underwriting appetite, relieving the availability crisis and reliance on the FAIR plan,” said Triple-I Chief Insurance Officer Dale Porfilio.
With events like January’s devastating fires, frequent “atmospheric rivers” that bring floods and mudslides, and the ever-present threat of earthquakes – alongside the many more mundane perils California shares with its 49 sister states – premium rates that adequately reflect the full impact of these risks are essential to continued availability of private insurance.
Tariffs and threats of tariffs have been roiling financial markets since January. Property and casualty insurers are no less concerned, as the cost of repairing and replacing damaged property is a driver of claim costs and, ultimately, policyholder premiums.
Triple-I Chief Economist and Data Scientist Dr. Michel Léonard recently sat down to explain the implications of tariffs and trade barriers for insurers and what economic considerations concern industry decisionmakers.
While property and casualty insurers write many kinds of coverage, the lines Léonard primarily discussed were homeowners and personal and commercial auto – “lines that have a physical emphasis on repair, rebuild, and replace.”
Lumber from Canada; cars, trucks, and parts from Canada and Mexico; and garments, furnishings, and technology from Asia all come into play when considering the prospective impacts of tariffs on replacement costs, Léonard said.
“When we’re focusing specifically on China,” he said, “we’re looking primarily at farm equipment and alternative-energy components.”
Uncertainty around tariffs – particularly in recent weeks, as tariffs on Mexico and Canada have been imposed and “paused” – makes analysis even more difficult.
“Much depends on how much clarity there is, how much communication from the policymakers, from the administration and from the legislature,” Léonard said. It’s also important to remember that impacts can last well beyond their implementation and withdrawal.
During the first Trump Administration, tariffs on soft commodities, beef, grain, and so forth had impacts for several years afterwards.
“Those tariffs were fairly short lived,” Léonard said, “but for two to three years afterward farmers were uncomfortable investing in equipment at the same pace, and that reduced farmowners’ insurance growth.”
Regardless of how the current discussions around tariffs play out, the Trump Administration has signaled a decided shift in policy toward greater protectionism. As a result, Léonard said, “We should expect a repositioning in our understanding of our replacement costs and underlying growth forecast for the next 12 months, at a minimum.”
He projects a period of “most likely 24 to 36 months” in which growth will be slower and inflation – including replacement costs for the P&C industry – will be higher.
