Introduction: A New Reality for HOAs
For many homeowners associations (HOAs) in California, the phrase “insurance renewal” once meant a routine formality. But in 2025, the backdrop has shifted dramatically. Many aging HOA communities are finding it harder, or in some cases, impossible; to secure affordable, standard insurance coverage. Instead, boards are being confronted with steep premium hikes, reduced coverage options, policy non‐renewals or outright denials, and the looming possibility of moving into a surplus lines market or relying on last‐resort insurers.
This is part of what industry voices are calling the “California HOA insurance crisis”; a combination of market hardening, regulatory pressure, escalating hazard exposure, aging property portfolios, and insurers pulling back from risk. For HOA boards, especially those managing older common‐interest developments, this means the insurance component of your annual budget and risk mitigation strategy can no longer be taken for granted.
In this article we’ll explore why carriers are increasingly wary of aging HOA properties, how the insurance market is evolving (including the growth of HOA coverage denial and surplus lines HOA options), and critically; what your board can do to improve insurability, control costs, and maintain stability for your community.
1. The Hardening Insurance Market in California
Before looking at HOAs specifically, it’s helpful to see the wider market context. California’s homeowners and association insurance market has been under significant strain for several years. As another commentary puts it: “insurers are paying out $1.09 in expenses and claims for every $1 they collect in premiums.”
Key drivers of this hard market include:
Escalating natural hazard losses, notably wildfires, but also increasingly storms, flooding, and other climate‐driven perils.
Aging building stock and infrastructure, which increases loss risk and severity.
Inflation in construction costs (labor, materials), which raises replacement costs and claims exposure.
Rising reinsurance costs and capacity constraints for insurers, which flow through to higher premiums or tighter underwriting.
Regulatory and market restrictions in California that limit insurer flexibility on pricing and underwriting. For example, insurers have faced restrictions on using forward‐looking catastrophe models and reinsurance cost in rates.
These factors together have created a less forgiving insurance marketplace, where risk tolerance is lower, premium increases are steeper, and coverage availability is more uncertain. For HOAs, especially older communities with aging assets, this spells trouble.
2. Why Aging HOA Properties Face Heightened Risk in the Eyes of Carriers
When insurers evaluate an association property for underwriting, several attributes raise red flags—many of which disproportionately apply to aging HOAs. Some of the most relevant are:
a) Higher Probability of Loss / Deferred Maintenance
Older properties often carry deferred maintenance, aged roofs, older mechanical systems, outdated electrical/plumbing, and building envelope vulnerabilities. These translate into elevated risk of claims (e.g., water intrusion, fire, structural failures). Carriers see this as poorer risk.
b) Replacement Cost Exposure
Aging communities may have legacy designs or component lifecycles that are nearing major replacement thresholds (roofing, siding, paving, elevators, pools). When replacement costs are high, insurance exposure is larger, making the risk less attractive.
c) Reserve Fund Weakness
Many aging HOAs have under‐funded reserves, meaning the board may struggle to finance major repair/replacement projects or may defer them. Insurers view weak reserves as a sign of financial instability and heightened risk of unaddressed issues turning into claims.
d) Complex Risk Environment
Older communities may not comply fully with current building codes or safety upgrades (e.g., fire safety, seismic retrofits, wildland‐urban interface mitigation). Carriers may demand upgrades before renewing coverage, or they may exclude certain perils.
e) Loss History and Tight Underwriting
If a community has prior losses, frequent claims, or an outdated building profile, carriers often either decline renewing, exclude perils, or shift to higher cost markets. This becomes a cycle of increasing risk and cost.
f) Market Exit by Carriers
Due to the broader market pressure, insurers are reducing their footprint in higher‐risk geographies or with risk profiles they view as unattractive. This means fewer admitted market carriers willing to underwrite aging HOAs, and thus more boards are forced into the surplus or non‐admitted market. For HOAs, this means HOA coverage denial or having to secure surplus lines HOA policies at higher cost.
3. The Rise of Coverage Denials and Surplus Lines HOAs
Terms you’ll increasingly hear: HOA coverage denial and surplus lines HOA. Here’s what they mean in this context:
Coverage Denial: When an insurer declines to renew or issue a policy for an HOA due to risk profile, location, condition of property, loss history, or insufficient mitigation.
Surplus Lines (E&S market): When standard (admitted) carriers aren’t available or willing, associations may have to go to non‐admitted insurers (surplus lines). These can offer broader risk appetite but at higher premiums, greater exclusions, fewer consumer protections, and less regulatory oversight.
In California specifically:
The California Fair Access to Insurance Requirements (FAIR) Plan (often the “insurer of last resort”) is increasingly being tapped where private market capacity is insufficient.
Many carriers are pulling out of high‐risk zones, leaving HOAs with fewer options and pushing them into surplus markets or specialty carriers.
The combination of low capacity, higher risk exposure, aging property portfolios, and tougher underwriting criteria means older HOAs are more vulnerable to being placed in surplus lines or denied altogether.
4. Specific Impacts on HOA Boards & Communities
For HOA boards managing older communities, the insurance challenge is not just theoretical, it has real operational and financial consequences:
Premium spikes: Policies may increase dramatically year-over-year or carry large deductibles.
Coverage limitations: Some carriers may exclude certain perils (water damage, wildland fires, seismic) or require special mitigation before writing a policy.
Non‐renewals: HOAs may find that their current insurer will not renew the policy, forcing them to find an alternative market under short timelines.
Special assessments: If insurance becomes unaffordable or coverage gaps are large, boards may face the need to levy special assessments to cover deductibles, repairs, or uninsured losses.
Project delays: When insurance costs and risk profiles rise, boards may put off needed capital projects or upgrades; ironically increasing future risk.
Resale impact: Prospective buyers often scrutinize insurance costs, reserves, and risk exposure. Communities with high premiums or poor insurance profiles may become less attractive.
5. What Boards Can Do to Improve Insurability & Mitigate Risk
Although the market is tougher, aging HOAs are not doomed. Boards that adopt proactive strategies can improve their insurability profile, potentially reduce premium escalation, and maintain broader carrier access. Here are concrete steps:
a) Conduct a Comprehensive Risk Audit
Work with your management team and/or insurance advisor to identify major risk exposures: building envelope issues, fire risk, water intrusion, deferred maintenance, inadequate reserves. Document findings and develop a mitigation plan.
b) Strengthen Your Reserve Funding & Capital Plan
As noted earlier, under‐funded reserves raise red flags for carriers. Align your reserve study with replacement timelines, increase annual contributions, and communicate with homeowners. Clear funding plans support better underwriting.
c) Accelerate Deferred Maintenance and Capital Projects
Don’t wait for an insurer to require work. Proactively address major deferred capital repairs (roofs, piping, siding, structural components, fire systems). Demonstrating that the association is reducing risk helps underwriting.
d) Strengthen Loss Control and Preventive Maintenance Programs
Implement regular inspections, vendor coordination, maintenance tracking, and documentation. Show carriers that the association has strong risk management protocols, this improves risk profile.
e) Engage an Experienced Insurance Broker / Advisor
Select a broker with HOA/CID (common interest development) experience that understands the nuances of older properties, surplus lines markets, and California underwriting. They can help you navigate market access, structure submissions, and evaluate competitor carriers.
f) Prepare for Surplus Lines and Non‐Admitted Market Realities
Even if you prefer admitted carriers, be ready to evaluate surplus lines options. Understand that premiums may be higher, but with fewer exclusions and more capacity you may still secure coverage. Discuss trade‐offs with your board and homeowners.
g) Enhance Communication with Homeowners
Be transparent with your community about rising insurance costs, coverage changes, and the board’s mitigation efforts. When homeowners understand the drivers, they’re more likely to support funding decisions and mitigation initiatives.
h) Build & Maintain Mitigation Documentation
Create a “risk file” for the association that includes inspection reports, maintenance logs, condition assessments, mitigation work, upgrade records, fire‐hardening work, reserve study excerpts, and vendor contracts. This demonstrates to carriers the association is managing risk.
6. Why Location, Age & Design Matter More Than Ever
Aging HOAs often combine several risk attributes: older construction, perhaps built to legacy codes, in areas that may be changing (e.g., more wildland‐urban interface, vegetation risk, fire exposure). Some key factors:
Wildfire & wildland interface: Even HOAs that are not single‐family homes may face vegetation encroachment or ember exposure. Private carriers are scaling back in high‐risk zones.
Seismic/earthquake risk: Older buildings may not meet modern seismic retrofits, presenting structural vulnerability.
Building envelope aging: Older siding, windows, and roofs may experience moisture intrusion, mold, or structural decay; insurers treat these as higher risk.
Loss history escalation: Older properties may have had multiple past claims, making them risk‐tiered for carriers.
Regulatory change: As California updates building codes and disaster mitigation standards, older communities may lag, reflecting increased risk in underwriting.
The confluence of these factors means that aging HOAs must strive to demonstrate risk reduction, strong maintenance practices, and financial resilience, or accept being placed into more expensive and limited insurance pools.
7. The Role of the Insurer of Last Resort – FAIR Plan & Beyond
In California, when standard markets retreat, HOAs may face being placed into the California Fair Plan. But relying on the FAIR Plan is not ideal: coverage is often limited, costs higher, capacity constrained, and many lenders may not accept it without wrap policies.
Insurers and regulators have taken steps to address the broader crisis. For example, the California Department of Insurance (CDI) announced a temporary expansion of FAIR Plan coverage for condos and associations with aggregate limits of $100 million per location beginning July 26, 2025. insurance.ca.gov While this provides short-term relief, the underlying issue remains: the standard admitted market for aging HOAs is shrinking.
Boards should treat the FAIR Plan as a fallback, not a first option, and work to stay in the voluntary market if possible.
8. Why Timing, Submission & Documentation Matter in Underwriting
When a renewal comes up, the quality of your insurance submission matters more than ever:
Provide a thorough risk/mortality profile of your HOA: age of buildings, recent upgrades, major losses, maintenance history.
Highlight mitigation efforts: fire hardening, roof replacements, plumbing upgrades, pool/water system safety, elevation, seismic retrofits.
Update vendors and maintenance logs: show you are staying current.
Demonstrate financial strength: reserve study, minutes of board meetings, budget plan, special assessment schedule, delinquency rate.
Be transparent with your broker and insurer, they need accurate data.
A strong submission can make the difference between coverage renewal in the admitted market vs being pushed into surplus lines.
9. Action Plan for HOA Boards This Year
Here is a pragmatic checklist for HOA boards managing older properties in 2025:
Engage your HOA’s insurance broker early (4-6 months ahead of renewal).
Conduct a full property condition assessment, focus on major capital items (roofing, siding, plumbing, fire systems).
Update your reserve study and review funding adequacy.
Document recent repairs, inspection logs, vendor follow-through, maintenance programs.
Review and approve a risk mitigation plan (fire/hazard hardening, water intrusion prevention, seismic/earthquake readiness).
Budget for anticipated premium increases or deductible shifts.
Communicate with homeowners about the insurance market context, cost drivers, and what the board is doing.
Prepare fallback funding or plan for special assessment if needed.
Consider exploring alternate markets (surplus lines) if admitted carriers won’t renew; evaluate cost/benefit.
Maintain thorough documentation throughout the year to strengthen your next submission.
Conclusion: Facing the Crisis Proactively
The California HOA insurance crisis is very real, and it is especially impacting aging HOA communities. What was once a relatively stable line item in annual budgets is now a potential hazard: coverage denials, higher premiums, reduced options, and increased exposure for the association and homeowners.
But with thoughtful planning, strong maintenance and reserve discipline, proactive risk mitigation, and documentation, HOA boards can navigate this challenging environment. The choice is clear: act now or react later. The latter may cost you more.
At PMI SouthBay, we specialize in helping HOA boards in Santa Clara County and beyond manage these very risks; aligning maintenance planning, insurance strategy, reserve studies, and vendor coordination to strengthen insurability and community resilience. If your community is facing an upcoming renewal or is unsure about its insurance position, we’d be glad to support your board with an audit, strategy session, or broker consultation.
👉 info@pmisouthbay.com contact PMI SouthBay today to protect your community’s future and navigate the hardening market with confidence.
