The homeowners insurance market in Florida, California, and Louisiana has been quietly unraveling for several years, and 2025 was the year the unraveling stopped being quiet. Major carriers exited entire states or stopped writing new policies in whole regions. Premiums in some ZIP codes doubled. State-run insurers of last resort ballooned past their statutory comfort levels. And the policy response so far has consisted mostly of patching the symptoms while pretending the underlying problem—that climate risk is increasingly uninsurable at politically acceptable prices—will somehow resolve itself.
It won’t, and the housing market is starting to notice.
What’s actually happening to the market
State Farm, Allstate, Farmers, and several smaller carriers have either stopped writing new policies in California, withdrawn from large parts of Florida, or filed for substantial rate hikes that regulators have alternately approved or blocked. In Florida, the state-backed Citizens Property Insurance Corporation has grown to over a million policies—a position state law was specifically designed to prevent—and faces a solvency question that the legislature continues to defer. In Louisiana, hurricane losses combined with reinsurance cost spikes have driven multiple regional insurers into receivership. In wildfire-exposed parts of California, the FAIR Plan covers homes that no private carrier will touch, at limits that don’t actually cover modern home values. The proximate cause is loss experience: the actuarial assumptions that priced these markets ten years ago no longer match the frequency and severity of recent catastrophes.
The mortgage market problem nobody is solving
Mortgages require homeowners insurance. When insurance becomes unavailable or unaffordable, the mortgage market in those areas seizes up. Buyers can’t close, sellers can’t exit, and refinances stall. Force-placed insurance—the policies lenders impose when borrowers go uninsured—is more expensive and offers worse coverage, which pushes already-stressed homeowners toward delinquency. Cash buyers can step in, which is exactly what’s happening in parts of South Florida, but cash buyers tend to be investors, and the conversion of climate-exposed neighborhoods from owner-occupied to investor-owned has consequences for community stability that haven’t been seriously addressed. The reinsurance market, which spreads risk globally, has been raising rates on U.S. catastrophe exposure for several years. None of this is hidden; insurance executives have been saying so on earnings calls.
The political non-solution
The political response has split between two losing strategies. Some states have suppressed rate increases through regulation, which preserves affordability briefly but accelerates carrier exits, leaving residents with worse options. Other states have allowed rates to find market levels, which keeps insurers writing but prices out a large share of homeowners and shifts costs onto state insurers of last resort, which are themselves underfunded. Federal flood insurance offers a partial template—socializing risk that the private market won’t bear—but expanding that model to wildfire and wind exposure would require a political coalition that doesn’t currently exist. Meanwhile, the underlying climate risk continues to accumulate.
Bottom line
The home insurance crisis in climate-exposed states is real, structural, and getting worse, and there is no current policy on the table that meaningfully addresses it. Buyers in those markets should price the risk explicitly. Pretending it isn’t there is no longer an option.
Leave a Reply