The Ripple Effect:

How Recent LA Fires Could Impact HOA Insurance

BY Andrew Hay, CAMEx, CCAM-ND.PM

In the spring volume of the Law Journal Michael Kennedy, Esq., Terri Guest and Kimberly Lilley provided some tremendous insight on current and future insurance challenges. This article uses information from their insights to discuss impacts on managers and the communities we service throughout California.  As California grapples with the aftermath of another devastating wildfire season, including the recent fires in Los Angeles, the ramifications are being felt across multiple sectors.  Our HOA’s are forced to confront the dual challenges of rising insurance costs and increasingly stringent coverage requirements. With wildfires becoming more frequent and destructive, the HOA insurance market is undergoing significant shifts that could reshape the landscape for community associations.

The Escalating Cost Of HOA Insurance

The cost of insurance for HOAs in wildfire prone regions like California has been climbing steadily over the past decade. The recent LA fires are likely to exacerbate this trend, pushing premiums even higher. Insurance companies, reeling from the financial impact of massive claims payouts, often adjust their pricing models to account for increased risk.

Key Trends In Rising Costs

SKYROCKETING PREMIUMS

HOAs in high-risk areas have reported premium increases of 20% to 100% over the past few years. For example, a 101-unit community built in 1968 saw its yearly premium rise from $35,000 to $188,000 due to galvanized plumbing pipes and electrical panels deemed fire risks (Kennedy et al., 2025).

Increased Deductibles

To offset rising costs, many HOA’s are electing for higher deductibles.  Unfortunately, this can transfer more of the burden to the HOA as incidents that would normally be covered by insurance do not meet deductible minimums and the cost is solely borne by the Association.  This also can impact the members directly if damages are incurred due to homeowner-maintained components, but deductible amounts are not met.  Owners may be stuck with very large bills.  It is critical that management companies communicate changes in deductible amounts to the members of the HOA’s we manage and do so multiple times throughout the year.

Reduced Coverage Options

Many insurers have withdrawn from high-risk markets altogether, leaving HOAs with fewer choices and less comprehensive coverage.  Insurance brokers are squeezed to find any coverage for high-risk properties and often times can only provide one option to their clients at the 11th hour.  As managers, we must communicate this to our board members as soon as we know a non-renewal has occurred and be up front about the uphill battle the association will face in obtaining coverage.

Stricter Underwriting Standards

In response to growing losses, insurers are tightening their underwriting standards. HOAs are now being required to demonstrate proactive risk mitigation measures to secure or maintain coverage. This includes:

Vegetation Management

Regular clearing of brush and other flammable materials around HOA properties. CAL Fire has a number of resources available for managers to educate their board members and homeowners on what must be done to mitigate fire risk on properties.

USE FIRE-RESISTANT BUILDING MATERIALS

Upgrades to siding, roofing and other components to enhance fire resistance.  Have conversations with your board members today about what components need to be updated in their Reserve Study so that funding is available as projects come due.

COMMUNITY-WIDE EMERGENCY PLANS

Documented plans for evacuation and disaster response.

Additionally, insurers are scrutinizing infrastructure such as plumbing and electrical systems more closely. Communities with older systems may face non-renewals or drastically increased premiums unless upgrades are made (Kennedy et al., 2025).

The Role Of State Legislation

California’s legislature has taken steps to address the insurance crisis, including laws aimed at stabilizing the market and protecting homeowners. However, these measures often fall short of addressing the unique needs of HOAs. For example:

Fair Plan Coverage Gaps

The California FAIR Plan, designed as a last resort for high-risk properties, provides limited coverage and may not fully meet the needs of HOAs.  All reports indicate that this program is overextended and that in the event of a statewide disaster there simply will not be enough funds to help even everyone who is paying for coverage through this program.

Rate Regulation Challenges

Proposition 103 has constrained insurers’ ability to adjust rates to reflect actual risks, leading to reduced market participation (Kennedy et al., 2025).  Likely the single biggest cause for our current crisis, and the state is not motivated, despite everyone then telling them this must be fixed, to make the necessary changes to accommodate current needs.

Creative Solutions And Challenges

To manage risk, some insurers have begun separating wildfire coverage from other fire risks, spreading liability across multiple carriers. However, ambiguity in the definition of “wildfire” under California law has hindered the adoption of these innovative policies (Kennedy et al., 2025).

Funding Increased Premiums

For HOAs facing skyrocketing premiums, financing options are limited. Special assessments, premium financing companies and borrowing from reserve funds are among the few available solutions. However, these options often come with high costs or legal constraints. Boards must exercise their best judgment and plan for worst-case scenarios in their budgeting processes (Kennedy et al., 2025).

What HOAs Can Do

To navigate these challenges, we must take a proactive approach:

Engage With Insurance Brokers

Be sure to partner with brokers who specialize in HOA insurance to explore all available options and identify policies that balance cost and coverage.  As professional managers and management companies our client rely on our experience and relationships to help them in times of crisis.

Invest In Risk Mitigation

Know your communities and help them implement fire safety measures to not only protect the community but also improve insurability.  Do not wait for CalFire or the local jurisdiction to tell you that your clients must do these things, start now!

Looking Ahead

The recent LA fires are a stark reminder of the growing risks posed by climate change and urban expansion into wildfire-prone areas. For managers, the path forward will require resilience, adaptability and collaboration. By staying informed and taking proactive measures, we can help our clients better navigate the shifting insurance landscape and safeguard their communities against future risks.

Andrew Hay, CAMEx, CCAM-ND.PM, is a CACM board of directors’ member and CEO of The Helsing Group Inc., ACMC.