Rep. Harlan Vincent (R-Ruidoso Downs) asks questions to a panel on the Interim Legislative Finance Committee in Mescalero. Danielle Prokop/Source NM
Some counties saw huge increases in home insurance premiums between 2020 and 2023
At a hotel surrounded by fresh burn scars, New Mexico lawmakers and insurance regulators described a bleak and uncertain future for prospective homeowners seeking adequate insurance for homes built in and around increasingly fire-prone forests.
The preliminary meeting of the House Finance Committee at the Inn of the Mountain Gods in Mescalero on Tuesday comes shortly after the state Insurance Commission lost a lawsuit against State Farm, New Mexico’s largest insurer. The state accused the company of improperly denying some claims for damages caused by the South Fork and Salt fires in the Ruidoso area.
The office distributed a fact sheet showing that some counties saw huge increases in homeowners insurance premiums between 2020 and 2023, ranging from 41% to 47% in Hidalgo, Roosevelt and Curry counties. On average, premiums in New Mexico increased 16% over the same period, and the average annual premium is $1,817.
Since the recent wildfires, the office has also seen an increase in the number of insurers refusing to renew or approve policies in higher-risk areas, said OSI Deputy Secretary Colin Baillio.
“We recognise that the loss of financial protection as a home or business owner is a huge issue for individuals and needs to be addressed on that basis,” he told MPs. “But it can also have huge implications.”
Those consequences include job losses for real estate agents and home builders, damage to economic development and extreme difficulty in acquiring home ownership for entire communities, including popular mining towns like Ruidoso, he said.
But regulators’ hands are tied when it comes to taking action against insurance companies that refuse to offer policies, Baillio said, so his office is focused on reducing risk to reassure insurers that they can continue to operate in New Mexico.
He is pushing for risk mitigation measures, which could include requiring individual homeowners to create defensible space around their home and making community-wide improvements, efforts he describes as “risk mitigation in a way that is recognized by the insurance industry.”
Despite the increase in cancellations and non-renewals, insurance companies in New Mexico remain largely profitable, according to OSI. However, insurers here suffered losses in 2016, 2017 and 2022, when the two largest wildfires in the state’s history occurred that year.
According to the OSI report, insurers nationwide have paid out more in claims over the past decade than they have collected in premiums.
The South Fork and Salt fires destroyed or severely damaged more than 1,100 homes, including about 230 lost to flooding. About a third of those were primary residences, and about 10% of the 1,100 households were under-insured, according to recent estimates from the Federal Emergency Management Agency of how many people are eligible for temporary government housing. (Only those who are uninsured and have lost their primary residence are eligible for temporary housing in trailers or mobile homes provided by FEMA.)
Rep. Harlan Vincent (R-Ruidoso Downs) said many of his constituents would not be able to get insurance on their new homes, even if they were able to rebuild them.
“I have a lot of friends who are in the insurance business. I’m not trying to get the state to compete with them,” he said. “But what do we do with our New Mexicans who want to come home and rebuild, especially in an area that’s been devastated?”
While the government does offer insurance known as the Fair Access to Insurance Requirements plan, OSI says it is a “last resort with minimal coverage” for owner-occupied homes and rented commercial buildings.
The maximum home insurance coverage is $350,000 and covers only the actual cash value, not the replacement cost, of a lost home. That means lenders won’t give mortgages to people with such insurance, lawmakers said.
Baillio said the OSI is working to be “creative” on the FAIR plans to persuade lenders to give mortgages to people in fire-prone areas, which could mean increasing insurance limits and providing replacement value coverage.
“We’re in the same boat as you,” Baillio told Vincent. “If we can do it in the competitive market, that’s the way to go, but we need a backup plan if that doesn’t get us anywhere.”
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