Finance Advisory Committee – January 2023

By Robert O. Jester
Finance Advisory Committee Chair

As published in The View, January 2023:

Question of the Month: Why have the Association’s insurance premium costs increased so much over the last two years?

It is extremely important to note that the insurance premium increase is not solely an issue for the Sun City Shadow Hills Association, but it is a nationwide problem for all homeowners’ associations. The reasons are in part:

  1. The vast extent of natural disasters that the United States has suffered over the last two years are a significant contributing factor to premium costs. For example, the wildfires in California have caused extremely high expenditures by insurance companies and worldwide the catastrophic losses have been $210 billion due to natural disasters. The consequence is, that there are fewer and fewer insurance companies willing to cover properties that might be subject to a natural disaster whether that is wildfires, earthquakes, tornados, or hurricanes and those that are willing to write the insurance, have significantly increased their premiums.
  2. It is important to remember that insurance companies “reinsure” the policies that they write, so they can control the extent of their losses on their policies sold. With large losses, a significant portion of the loss is suffered by reinsurance companies. Therefore, industry-wide reinsurance companies have been pulling back on how much risk that they are willing to accept. In addition, they have been increasing their premium charges to the insurance companies that they reinsure or in many cases simply refusing to write reinsurance for areas that have suffered large natural losses. For example, in northern California where communities suffered huge losses due to wildfires their insurance carriers passed a large portion of those losses on to reinsurance companies and many reinsurers have refused to renew policies. Nationwide insurance premiums have doubled, tripled, or quadrupled and in addition deductibles have been increased to as much as $100,000.00. The bottom-line is that this is not a Sun City Shadow Hills situation but a national situation of extreme insurance cost increases.
  3. One must also factor in the inflationary forces that we have seen recently with building costs increasing at least 8 to 10 percent along with supply issues nationally. All these inflated costs also have a direct impact when an insurance company determines premium costs, especially when one has “replacement cost coverage.” If replacement costs continue to go up, the consequence will be continued increases in insurance premiums.
  4. One specific factor that has touched our community is that we had two large liability losses due to personal injury claims in the period of 2018 to 2019 and those losses, combined with the natural disasters, caused our 2021 insurance carrier to not renew our policies. The good news is that we have not seen large personal injury losses since 2020 and those past losses will be approaching 5 years old, which means that they should no longer have an impact on our insurance premiums costs beginning in 2023.

So just remember Sun City Shadow Hills is one of 50,000 community associations in California where 13 million Californians live in 3,727,000 homes, we are all in this together and we are all suffering from increased insurance costs. Finally, the California Insurance Commission is studying ways to try to help all our 50,000 community associations find relief from these increases and hopefully we will see constructive progress in the near future.

Contact the author at