High-Value Homes at Risk: E&S Coverage Steps Up Amid Wildfire Threats

Homeowners in Nevada are increasingly losing their insurance coverage as major carriers pull out of high-risk areas, citing wildfire threats and mounting financial losses, according to a recent KUNR Public Radio report. Almost 1,500 policies have reportedly been canceled or not renewed statewide, reflecting a wider trend of insurers retreating from wildfire-prone regions.

Officials in Nevada have acknowledged the growing crisis but have not proposed a clear fix, while states such as California — and more recently Colorado — offer state-backed “insurance of last resort” programs like the FAIR Plan.

“California is always a main focus, but we are seeing this issue spread east into Nevada, the northern parts of Arizona, and into Colorado,” said Lance Peterson, Senior Underwriter, Personal Insurance, Burns & Wilcox, Las Vegas, Nevada. “Insurance carriers are really taking a hard look at these wildfire-exposed areas.”

California is always a main focus, but we are seeing this issue spread east into Nevada, the northern parts of Arizona, and into Colorado. Insurance carriers are really taking a hard look at these wildfire-exposed areas.

As wildfire risk and other climate exposures continue to reshape the insurance market, Homeowners Insurance non-renewals are becoming increasingly common in some areas. Options are especially limited for high-value homes, as programs like the FAIR Plan typically cap coverage below the value of these properties, leaving many homeowners underinsured. Solutions are available in many cases, however — including a new Atain-backed High-Value Homeowners Insurance program offered exclusively by Burns & Wilcox that focuses on catastrophe-exposed areas like California, Nevada, the Gulf Coast, the Atlantic states, Colorado, and Florida.

“The Atain product has been great for us in California,” said Catherine Mekemson, Senior Underwriter, Personal Insurance, Burns & Wilcox, San Diego, California. “There are not many options to insure high-value homes in these areas. It is a very good fit for homes that would have been taken by admitted markets in the past.”

The Atain product has been great for us in California. … It is a very good fit for homes that would have been taken by admitted markets in the past.

High-value homes and the risk of being underinsured

In July, Mortgage Professional America reported on the growing trend of mortgage lenders and high-net-worth buyers reevaluating home purchasing decisions over extreme weather risks, with many mortgage professionals seeing deals collapse in areas where insurance premiums have increased significantly or where buyers cannot secure insurance as carriers exit the marketplace. In addition to the major rate increases seen in catastrophe-prone areas in recent years, many owners of high-value properties have had to carry multiple policies or take on high deductibles to obtain coverage, Mansion Global reported in August last year.

The situation is exceedingly difficult for a growing number of homeowners, Mekemson said. “It is really becoming a concern,” she said. Even homeowners who purchase coverage under the California FAIR Plan are frequently underinsured, as the program offers a combined limit of $3 million per residential property, encompassing all coverage components. This total “is very low for the state,” Mekemson said. Wildfire deductibles could be as high as 5% to 10% of the home’s insured value.

In Nevada, Peterson said he sees clients daily who have received non-renewal notices on their existing Homeowners Insurance or who are buying a new home in a forested area and unable to find a carrier willing to take on the risk. “We have definitely seen an uptick within the last year and I think we will continue to see it,” he said. “If they have a mortgage on the property or lender requirements, they need to find insurance. That is where Burns & Wilcox comes into play, and we can usually provide them an option.”

The Atain-backed High-Value Homeowners Insurance program offered by Burns & Wilcox offers higher limits — up to $6.25 million — and has no wildfire or water sublimits or deductibles. “That is a big selling point,” Mekemson explained.

The program, which launched earlier this year and has capacity to write in all zip codes, can also be paired with a contents-only product to ensure complete coverage. “If a homeowner has a secondary or primary property that is at $6 million in total insured value and it is all on the structures, they can then go to a contents-only policy so they can get full replacement cost coverage for their belongings,” Peterson noted.

Obtaining coverage for water backup, wildfire support

Water damage accounted for nearly 23% of Homeowners Insurance property damage claims in the U.S. in 2023, according to the Insurance Information Institute, and household water damage and freezing claims averaged $13,954 each between 2018 and 2022. For high-value properties, losses can be exponentially higher. “I have seen water losses as high as $1.5 million on a single loss,” Mekemson pointed out. 

While obtaining sufficient coverage for water losses can be a challenge for high-value homes in catastrophe-prone areas, another unique aspect of the new High-Value Homeowners Insurance program offered by Burns & Wilcox is that it provides up to $100,000 in water backup coverage and $25,000 for mold damage. “That is rare in the Excess & Surplus (E&S) market space,” Peterson said. “The ‘bells and whistles’ you tend to see on policies for high-value homes in the admitted market space is what we can do with Atain.”

Homeowners in areas at greater risk for wildfires should also know that the program includes the support of Wildfire Defense Systems, a leading provider of wildfire loss intervention services. Many owners of high-value properties are accustomed to having a wildfire defense team as part of their Homeowners Insurance coverage, Peterson said.

“Wildfire Defense Systems comes on all of our E&S policies with Burns & Wilcox, whereas many competitors do not have a separate service like that,” he said. “This is the team that would respond in the event of a large wildfire. It is a very valuable service.”

Advice for homeowners

Navigating the insurance market requires careful attention to both coverage details and risk mitigation. Mekemson emphasized that insurance brokers play a key role in educating homeowners about the importance of safeguards on their properties — from central station fire and burglary alarms to water shutoff devices — as well as the policy forms and exclusions that may be overlooked.

To avoid gaps in coverage, she said, “it is really important to do your research and make sure you are working with an independent agency that has an understanding of the non-admitted market.”

It is really important to do your research and make sure you are working with an independent agency that has an understanding of the non-admitted market.

An independent insurance broker “is going to be well-versed in this field and have the most options,” Peterson added. Experiencing a loss is “already such a hard moment,” he said, and having the right policy in place can help lessen the burden.

“A total loss like we have seen in the Palisades and different parts of the West Coast is one of the worst moments in an individual’s life, and the last thing you need is to find out you were underinsured,” Peterson said. “In that moment, I cannot imagine finding out you are not going to get the full replacement cost of your home and your contents back — all of those memories. It would be tragic.”

A total loss like we have seen in the Palisades and different parts of the West Coast is one of the worst moments in an individual's life, and the last thing you need is to find out you were underinsured.