Your Risk Radar- January, 2025

What's New in Our World? ?

Just last month we looked into what 2025 might look like for the insurance industry?and talked about how catastrophe (CAT) claims have been and will continue to be an issue for the foreseeable future. Since then and as we're talking right now, what is likely to be the largest?wildfire?in US history has destroyed thousands of buildings in Los Angeles.?Preliminary estimates of insured loss up to this point are north of $20 billion. To put this in perspective, this is double the amount of damage that stemmed from the 2018 Camp Fire, which was the costliest?wildfire in California history. Some companies have already come out and said?their losses will exceed reinsurance retention. Insurance companies themselves buy insurance for large losses that might occur- this is known as reinsurance.?In this case, the insurance company is saying the reinsurance they purchased isn't going to be enough to pay for the total damages.?Over the past few years, California has been a state where it's extremely difficult to write insurance. Many insurance companies left the state entirely while others have cancelled thousands of policies due to the location in fire-prone areas. This event is only going to make it more difficult for residents of California moving forward.

Mainstream vs. Private Client

In the world of insurance, there are standard insurance policies that provide coverage?which may be similar across the industry. But what about high-net-worth-families?who have more to protect or where home values are substantially more? In most cases?the standard coverages offered?are not sufficient?for their situation, which has created a new market called private client insurance. When you have a home that is over $1 million, many insurance companies aren't able to write it due to their capacity. This is when?we start to have the conversation?on why a mainstream policy may not work for you.?In the world of private client insurance, there are only a few companies who do this and do it well. What are some of the things they do well? They have the ability to write coverage for high end homes in multiple states, can offer higher liability limits for protection, coverage for aircraft, yachts, expensive jewelry, and rare art pieces?along with many other things. How is the claims process different? Take the wildfires in LA for example. Many of these private client insurance companies partner with a wildfire defense company who may come out when wildfires occur and spray the ground around or even the home with a fire retardant solution. They may even trim brush or trees around the property to prevent a fire from overtaking a house. While this isn't guaranteed or available on every policy, it's something that sets a company apart from the standard. How much would this mean to you if you had a multi- million dollar home at risk of fire?

Coverage of the Month Roof Limited Loss Settlement Coverage

The biggest change we saw in the industry over the past year revolved around roof coverage. Recently, an endorsement called "Limited Loss Settlement" has started to roll out. While the wording differs between carriers, this endorsement removes replacement cost coverage for a roof after a certain period, based on its age (typically between 9 and 15 years old). At that point, the endorsement is added to the policy. Each company provides a matrix showing exactly how much you would receive if your roof were deemed a total loss and needed replacement.

In a real-life example, let’s say a roof is 15 years old, and a storm causes significant damage, requiring it to be completely replaced. Under this new endorsement with one of our companies, the client would receive 55% of the total cost to replace the roof—rather than true replacement coverage.

It’s imperative to review your policy to understand its specifics—every company is different!

About Our Newsletter

Ethan is a personal lines risk advisor specializing in private client insurance for families across the country. He has over 10 years?experience in the industry. His goal is to provide clarity and educate people about the rapidly changing industry.

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