For the first time in several years, we’re beginning to see an encouraging trend in the insurance market—reinsurance is starting to soften. In plain English, that means some HOA insurance premiums are beginning to decrease.

While it’s too early to say the hard insurance market is over, this is welcome news for many California community associations that have faced significant premium increases over the past several renewal cycles.

What Is Reinsurance?

Reinsurance is simply insurance for insurance companies.

When an insurance carrier takes on a large policy, they don’t always keep all of the risk themselves. Instead, they transfer part of that risk to another insurance company—a reinsurer.

For example, imagine an insurance carrier wants to insure a condominium community valued at $100 million, but they’re only comfortable taking on $50 million of that risk. Rather than declining the account, they purchase reinsurance for the remaining $50 million.

If a catastrophic loss occurs, the primary insurance carrier pays its portion of the claim, while the reinsurer covers the balance. This system has helped insurance companies manage large risks for decades.

Why Premiums Increased

Following the devastating Santa Rosa wildfires and other catastrophic losses across California, the reinsurance market tightened considerably.

Reinsurance companies began charging significantly more to insure high-risk properties, especially communities with:

• Prior claims history
• High wildfire exposure
• Large insured values
• Significant brush or wildfire hazards nearby

As a result, many associations were moved from the traditional Admitted Market into the more expensive Excess & Surplus (E&S) Market, causing premiums to rise dramatically.

The Good News

We’re now beginning to see signs that this trend is reversing.

Communities that experienced substantial premium increases over the past several years—particularly those in wildfire-prone areas or with prior claims—are starting to receive lower renewal premiums.

While rates are still well above where they were before the hard market, seeing premiums move downward is a positive step and one we hope continues.

What Comes Next?

Although we’re optimistic, it’s important to keep expectations realistic.

Most communities are unlikely to return to the low premium levels of several years ago. However, continued improvement in the reinsurance market could encourage more admitted insurance carriers to expand their appetite and increase competition.

More competition typically means better coverage options and more stable pricing for HOA communities.

We’ll continue watching the market closely and will keep you informed as new trends emerge.