Dave Bowman is starting to reconsider his choice to buy a home in Durango Hills.
He and his wife, Traci Bowman, bought the four-bedroom home at the end of September. It is nestled in a thinned stand of ponderosa pines at the toe of Missionary Ridge, not far from the southern edge of the 2002 fire.
Everything had been going swimmingly for the Bowmans. Dave found a job working for Chevron and Traci landed a gig as flight nurse at Mercy Hospital. So they packed up and left Louisiana for the tranquil beauty of Southwest Colorado.
“Nothing was getting any better in North Louisiana and we just love Durango, Bayfield, Pagosa, Ouray, Ridgway – I could have lived anywhere,” he said.
But Traci had to live within 30 minutes of the hospital, so when the couple found a home they liked in a quiet, wooded area, they prepared to buy it.
Wendy Most, a State Farm insurance agent in Durango, wrote the couple a quote for homeowners insurance. But six days before closing, the State Farm office called to inform the Bowmans that it could not write them a policy.
“I’m like ‘Holy (expletive), what am I going to do?’ So I started calling around. Nobody will write my homeowners insurance,” Dave said.
Geico, Travelers, other State Farm agents – all of them turned him down.
Finally, Dave secured a policy through Allstate. He paid his entire annual premium – $6,000 for his $950,000 home – up front. Two weeks after closing, the insurance company called to ask if it could send an inspector. Both Traci and Dave were away working, but he gave Allstate permission to send an inspector.
When Dave returned from his work trip, he found a letter in the mailbox.
“We are writing to inform you that the policy identified above will be canceled as of … (Jan. 2) … due to the following reason(s),” the letter read. “Dwellings located in a wildfire designated area must meet Wildfire Hazard underwriting guidelines.”
The letter went on to list several hazards noted by the inspector. Allstate did not afford him the opportunity to correct the hazards through mitigation – something the previous owner had done and Dave intended to continue.
By the time he checked his bank statement, most of his premium payment had already been refunded. He called his mortgage lender in Louisiana and explained the situation.
“We trust you, Dave. Just get it handled,” someone at the bank told him.
The Bowmans are not alone.
Across the state and country, homeowners insurance is becoming more expensive and harder to find as costly damage from natural disasters – wildfires, floods and severe storms, primarily – is causing insurers to pull out of certain markets.
A 2023 report prepared for the Colorado Division of Insurance by the consulting group Oliver Wyman found that the average homeowner insurance premium in Colorado increased 51.7% between January 2019 and October 2022. The same report found that three quarters of carriers shrank exposure in the state last year.
“The trend is concerning and the potential for a crisis is obviously concerning,” said Colorado Insurance Commissioner Michael Conway, head of the agency charged with regulating the insurance industry.
In Durango, it was just in the last year that homeowners, Realtors and insurance agents began to notice the widespread impacts of this trend.
Insurance carriers large and small are increasingly unwilling to write new policies in certain wildfire-prone neighborhoods. In drastic cases, carriers are refusing to renew, or even dropping, existing customers.
“If I would have known it was gonna be this nightmare, I might not have bought this house,” Dave said, as welders crackle behind him, rebuilding his wooden deck with fireproof metal.
The problem facing people like the Bowmans is not new, and its roots can be traced to both long-term and acute causes, experts say.
Where insurance companies are willing to write new business is dictated, to some extent, by reinsurers. Reinsurers are the insurance company’s insurance provider, and those companies can effectively control how much risk is too much for an insurer to take on.
Across the globe, reinsurers are tightening their belts in response to climate change-driven natural disasters that are becoming increasingly frequent and severe.
“It’s the perfect storm, right now, for homeowners insurance issues,” Conway said.
In 2023, there were 28 weather events that caused over $1 billion in losses across the U.S., according to the National Oceanic and Atmospheric Administration.
As a result, insurers are turning to third parties to collect data and create maps laying out the risk of loss. The maps give addresses or neighborhoods a score based on susceptibility to natural disasters and mitigating factors, such as proximity to a fire station and whether the surrounding environment is particularly fire-prone.
And as risk increases across the board, reinsurance costs follow.
If global warming is the long-term cause, acute financial losses prompt sudden increases in premium rates and decreases in risk tolerance. Across Colorado, damage from hailstorms costs insurance companies more than any other weather event, although wildfire risk is tightening the market in the Southwest.
Ben Frihauf, a Farmers Insurance agent in Durango, said Dave Bowman’s lack of options can be blamed on industrywide losses this year.
“It’s kind of a knee-jerk reaction you’re seeing in the industry,” he said.
State Farm, the largest insurer in the country, reported $13.4 billion in underwriting losses in 2022 and ceased writing new policies in the wildfire-prone state of California shortly thereafter.
Its financial outlook for 2023 appears just as grim.
Around the time a State Farm agent rescinded Dave’s quote – which coincided with the timing of news that the company had endured a rough third quarter, financially speaking – the company’s agents in Durango say they noticed a shift.
“Based on certain locations, State Farm is no longer writing new business,” said Kierstin Godson, office manager at Jay Hwang’s Durango State Farm agency.
To be clear, the company is not dropping clients. But it is choosing not to renew some, and others have seen their rates double, or worse.
“State Farm continues to write homeowners insurance policies across Colorado,” a regional spokesperson for the company said in an email. “Factors such as the location of the property relative to natural hazards, condition of the property, and the customer’s past claim activity and history are considered during our underwriting process.”
The spokesperson did not respond to a request for further comment.
Godson has never seen the maps or fire scores the corporate office uses. When a potential customer wants coverage, she plugs in an address and the system spits out a rate or a denial.
Around September 2023, something – likely the maximum risk score the company was willing to insure – definitely changed.
Suddenly, addresses in parts of Durango West, Forest Lakes, Edgemont developments and near Purgatory Resort could not be insured. Godson estimated her office made 15 to 20 calls, like the one Bowman received, to renege on State Farm quotes.
“It’s a huge bummer for us, too, because we’re losing business – massive amounts of business that we’re personally losing,” she said.
She estimated the office’s numbers have “plummeted” by 20% to 30% since the shift.
The maps Frihauf works from have a fire risk scale of 1 to 25. Two years ago, he could insure homes with a score as high as 17 if the homeowner had completed proper fire mitigation.
“Now, what Farmers has said is, ‘We’re not going to take anything over an eight,’” he said.
Frihauf estimates he wrote 25% fewer policies in 2023, just because Farmers won’t allow him to sell its product.
“I have one company – one company – that will write Edgemont, that will write Glacier Club,” said Terrie Anstead, the owner of Durango CoWest Insurance.
To the chagrin of people who spend thousands of dollars on fire mitigation work, it remains unclear how, or even if, that work impacts coverage and premiums in many cases.
Even Conway, the state’s insurance commissioner, said “there’s a lot of questions.”
“We don’t have good insight into what is actually happening with reinsurers mapping technology, how it’s being used, what the components are that go into it (and) how they’re making the decisions,” he said.
Although the technology is not new, Conway said that sophistication and reliance on it is novel enough that the state does not have a regulatory framework through which it can mandate the transparency.
“It is really sad,” Anstead said of rising rates.
Although few people are in as tight a situation as Dave Bowman, the impact of this trend has an expansive reach.
Monty Davis has owned a second home in Falls Creek Ranch for 11 years. A few years after the 416 Fire, Chubb, his insurance provider, doubled his premium. He switched to AIG, where he stayed until 2023, when the company declined to renew his policy.
He was able to slide in with State Farm before the company stopped accepting new policies in high fire-risk areas.
This may have been thanks, in part, to the Falls Creek Homeowners Association. Paulette Church, the HOA president, said that last year the neighborhood completed $117,000 worth of mitigation work in addition to 2,000 hours of volunteer work.
In some cases, she has been able to use proof of mitigation as leverage to convince insurance companies to cover a home there.
But other HOAs have not been as lucky.
William Borkett, the treasurer of the Cascade Village HOA, said American Family Insurance suddenly declined to renew coverage of the development’s condominium buildings and community center in June 2023.
After an exhaustive search, he was able to find one option: a high-risk pool. The HOA’s annual property and liability premiums jumped from $57,000 annually to $569,000.
The 10-factor increase caused HOA fees for condo owners to jump $3,900.
“It’s significantly impacted the owners,” Borkett said.
Ashley Truitt, Dave Bowman’s real estate agent in Durango, says the new insurance landscape means “the whole process changes.”
John Wells, founder of the Wells Group, said securing insurance was a last-minute task before closing.
“It’s become something that we used to take for granted and shouldn’t have, I guess,” he said. “But because it was pretty darn easy for decades, we knew we could get insurance so we helped the buyer get it toward the end.”
But what used to be “the last step” has become the next step after securing a lender.
In December, Truitt and Wells said they had not yet seen an impact on the housing market – but that doesn’t mean they won’t.
Wells called the recent clamping down “the biggest change in insurance” that he has seen in over 40 years in the real estate industry. In the last half of 2023, when he first started to notice more insurers declining coverage, He said a handful of sales fell through after buyers struggled to find insurance.
Some people, especially those buying expensive homes, are going to be less concerned with rising costs. But others may be left reeling, stuck either to contend with pricey insurance on a home they own, or unable to complete a purchase.
“It definitely is going to have an impact – how big, I don’t know,” Truitt said.
The way insurance brokers and Commissioner Conway see it, there are a few escape valves still in place to protect consumers.
The first may be changing economic trends.
“If interest rates start to come down, reinsurers will want to employ their capital in riskier ways than they are right now,” Conway said.
Frihauf said he expects that insurers will also start to accept more risk soon as the memory of recent high-loss weather events wears away.
Still, climate change is driving increasingly intense weather – and that isn’t changing anytime soon.
The state will implement a building and landscaping code for homes that fall in the wildland-urban interface by July 2025, and Conway said incentivizing home-hardening will be important in making Colorado’s insurance market attractive. He is calling for more transparency in the mapping of risk scores so that communities can adapt mitigation and hardening strategies to address fire hazards.
As the insurance landscape becomes barren, the state is also working on a plan of last resort.
A law establishing the Fair Access to Insurance Requirements, or FAIR Plan, was signed by Gov. Jared Polis last May. By early 2025, the state will facilitate insurance for homeowners who are otherwise unable to find it with a cap of $750,000.
The FAIR plan should provide enough coverage to repair or rebuild a home, Conway said, and officials at insurance companies have assured state lawmakers that they can provide wraparound coverage atop the state’s plan for more expensive homes.
The state will keep the FAIR plan pool small and funded, in part by operators who will have to share the risk and in part by homeowner premiums. Most other states have a similar system.
For people like the Bowmans, a better option can’t come soon enough.
After months of searching, with days left on the clock, Dave Bowman found homeowners insurance. It was a three-month grind, he said.
He submitted pictures with proof of $60,000 worth of fire mitigation and home hardening and secured insurance with American Modern Insurance Group to the tune of $5,700 annually. If the company cancels his policy, he is at a loss for what to do.
“I don’t know what’s going to happen moving forward with Durango Hills, because insurance has just been a nightmare for us,” he said. “Never in my life would I have thought I would have so much trouble giving the insurance company money to insure me.”