The Evolving US Homeowners Insurance Market: Four Major Trends and What We Know About Them

Margaret A. Walls
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Margaret A. Walls: Resources for the Future

No 26-07, RFF Issue Briefs from Resources for the Future

Abstract: Homeowners insurance markets in the United States have exhibited issues in recent years. Premiums are on the rise, obtaining and keeping coverage has become difficult, and the coverage provided by insurance has not kept up with the costs of repair and rebuilding. News stories of problems in insurance markets abound, especially in the wake of major disaster events such as the January 2025 Los Angeles wildfires (Darmiento 2025).In this issue brief, I describe what we know and don’t know about four major trends in homeowners insurance markets: (1) rising premiums, (2) increasing numbers of policy cancellations and nonrenewals, (3) growth in residual market plans (often referred to as “insurance of last resort”), and (4) coverage gaps. I synthesize the trends and findings from a rapidly growing body of research in finance and economics.Insurance acts as an important risk transfer mechanism, shifting the financial burden of infrequent but high-cost weather events from individual households to a diversified pool of risk-bearers. This function not only protects valuable household assets but also enables insurance to serve as a key pillar of US housing and mortgage markets. The four problems examined in this issue brief represent distinct ways in which this financial arrangement is coming under strain.

Date: 2026-09-01
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