APCIA responds to Treasury Department report on homeownership costs

President identifies primary driver of soaring prices

APCIA responds to Treasury Department report on homeownership costs

Property

By Josh Recamara

The American Property Casualty Insurance Association (APCIA) has issued a statement in response to the US Department of Treasury’s Federal Insurance Office report highlighting key factors affecting homeownership costs and insurance availability.

The primary driver of rising homeownership costs is inflation, particularly the increased cost of construction materials and labor, according to APCIA president and chief executive David Sampson (pictured). Over the past five years, construction costs have risen by 37.4% while homeowners’ insurance costs have only increased by 22.4%, based on data from the Bureau of Labor Statistics.

Sampson also pointed out that many new homes are being constructed in areas more prone to natural catastrophes, citing California’s growth, where over two million homes have been built in regions with high wildfire risk. Despite this, necessary wildfire mitigation improvements have not been fully implemented.

“Insurance is still a relatively small percentage of homeownership costs compared to average property taxes, utilities, and mortgage loans,” said Sampson.

The statement also referenced concerns raised by the National Association of Insurance Commissioners (NAIC), which terminated its data-sharing agreement with the Treasury’s department. The NAIC warned that the data in the FIO’s report could lead to misleading conclusions about the US property insurance market’s health.

Sampson noted that the best way to improve insurance availability is by allowing competitive private markets to accurately price risk, rather than relying on government rate suppression and policy constraints. He emphasized that insurance affordability can be better addressed through improved mitigation and resilience programs.

“Insurers remain committed to our policyholders and American consumers,” Sampson added. “Insurers’ core business is protecting people and helping them recover from catastrophic losses to their homes, cars, and businesses.”

The statement came amid reports from Moody’s RMS, which estimated that the January 2025 Los Angeles Firestorm could result in insured losses between $20 billion and $30 billion.

The firestorm, which includes multiple major fires such as the Palisades and Eaton Fires, has caused extensive property damage, particularly in residential, commercial, and industrial areas. These losses are complicated by the need for reconstruction efforts that could drive up costs due to factors such as debris removal and compliance with local building codes. The fires have already affected over 12,000 structures, and significant uncertainty remains regarding the full scope of damages.

The firestorm has raised awareness about the growing risks associated with wildfires, particularly in urban areas, and could prompt regulatory changes in California.

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