Nevada Homeowners, Realtors Warn of ‘Insurance Crisis’ As Insurance Companies Drop Coverage

Editor’s note: This story has been updated with a comment from Assemblywoman Heidi Kasama

During a joint interim legislative committee hearing of Commerce and Labor this morning, homeowners in Incline Village highlighted a growing crisis related to insurance companies, namely American Family Insurance and Farmers Insurance, dropping or reducing coverage on properties in areas they have deemed “at risk” due to their proximity to or within “forested areas.”

During public comment, Incline Village homeowner Sandra Richards told the committee that her HOA monthly dues have skyrocketed from $600 to $1700 a month due to the non-renewal of their Home Owner Association’s (HOA) condominium insurance policy. “The work for you is critical now. We are not in a vacuum. This insurance crisis will devalue real estate, destroy communities, limit home ownership to a narrow profile, impact tourism, and ultimately impact the revenues of the state and county.”

The consequences of these insurance non-renewals is further explained by the founder of Lakeshore Realty Chris Plastiras who has been selling real estate in Incline Village for 45 years.

Plastiras told The Globe: “American Family is pulling out of Incline Village. Farmers is gone. State Farm is the only game in town, that I am aware of. In my perspective this will have a very negative effect on real estate values because we can’t get loans on homes that cannot get insurance. The insurance industry has seen fit to put us in a “high-risk” category that takes them out of the realm of being overseen by the insurance industry… allowing insurance companies to set pricing however they see fit. They can raise rates, relatively exponentially, and that becomes a problem. I have seen a lot of things. I have worked in the this market through four recessions and there is no quick fix unless the governor calls an emergency session of the legislature.”

An emergency session of the legislature may seem extreme to some, however, the situation is dire for many fixed-income homeowners, like Richards, who reside in single family homes or condominium communities managed by an HOA, and who fear the worst if they wait until next year, when the legislature resumes session in February.

There are over 100 HOA’s in Incline Village who are currently scrambling to find coverage for their properties, with many having to resort to partial coverage or exorbitant rate hikes which are then passed down to the owners through assessments and/or increased monthly dues.

A 35-year realtor in Incline Village, who resides in an HOA community dropped by their insurance carrier, is facing $6,000 in fire insurance assessments on her condo this year and her monthly dues of $600 will more-than-double to an anticipated $1,500 a month.

She, on condition of anonymity told The Globe, “HOA’s are underinsured. In just this past week, four more HOA’s have been cancelled by their insurance company. A buyer can’t get a loan in three communities I am aware of, mine included. We have eight units for sale in my complex because no one can get a loan. I don’t remember the last time we have had this much inventory in just one HOA community.”

Adding to the insurance crisis in the Northern Nevada basin is that HOA condominiums are considered commercial property, not residential property. Richards, who is spearheading a new group, the Coalition of Incline Village Property Owners, told The Globe, “HOA’s are considered commercial and not residential, which means we are pushed to the back in terms of where the Insurance Commissioner can place his interests. I am not critizing anyone. No one saw it coming.”

Denise Bremer, President of the Incline Village Association of Realtors, further warns that this trend of non-renewals of home insurance policies is not isolated to “at risk” areas, but is spreading across Nevada, including Las Vegas, and other states.

Bremer told The Globe: “This all started in California and it has naturally migrated this direction. We are telling other states, “Hey, this is coming,” and that it is a natural progression. I have been dealing with the California side for years, but it is more prevalent now due to the recent wildfires.”

According to Bankrate, California has paved the way for the evacuation of insurance carriers from the real estate market.

“Seven of California’s largest property insurers, State Farm, Allstate, Farmers, USAA, Travelers, Nationwide and Chubb recently decided to limit new homeowners policies in the Golden State, raising questions about the stability of the California home insurance market. California’s state insurance regulations, inflation, increased wildfires and heightened reinsurance costs have all contributed to the current California home insurance crisis,” Bankrate reports.

Bremer added, “This is the first year we, in North Tahoe and around the Nevada basin, are getting hit by it. One thing Insurance Commissioner Scott Kipper did do is reach out and we are providing him data, including a list of single family homes, not HOA’s, that are uninsured. He is still collecting the data. Vegas is losing insurance, too. Certain insurance companies are completely pulling out of states. Nevada still has some coverage. The Insurance commission is being somewhat cautious because we haven’t been totally abandoned…yet. If push comes to shove, the commissioner could declare this as a critical situation and could get a special legislative meeting involved. At what point it this critical? The realtors do not know and we are waiting on his next move.”

When asked how many uninsured homes were provided to the commissioner, Bremer responded, “Well, over 100 single family homes have been dropped. Condos are coded commercial and are not included in the data, which also begs the question of why they are coded as such? The non-renewals are hitting the larger HOA communities first, who average 100-250 units.”

Although Incline Village is a national leader in forest management and defensible space, insurance companies, Bremer claims, are using outdated data and satellite images from ten years ago for their coverage assessments.

Plastiras, who was elected to the Board for the North Lake Tahoe Fire Protection District, and served 12 years, noted, “We have the highest ISO fire department you can get. We are ISO-1. Vegas is an ISO-1. But insurance companies no longer recognize that as a benchmark as to how they set their rates. Yes, we are in a fire zone, but they don’t take on the nuances of fire protection methods and defensible space, so this becomes another issue. We did everything possible to maintain our ISO rating and now that was all for naught?”

Tia Rancourt, Public Information Officer for the North Lake Tahoe Fire Protection District, is encouraging affected homeowners to file a complaint with the Nevada Division of Insurance and told The Globe that Fire Chief Sommers is working on the issue with constituents and officials at the federal level.

After the legislative hearing this morning, Richards told The Globe, “Our government has a job and is needed to figure this out. We are in crisis. There is an insurance crisis here, and across the country.”

The Globe has contacted the Insurance Commissioner’s office and Assemblywoman Heidi Kasama (R-Las Vegas) who sits on the interim committee of Commerce and Labor and is a real estate professional. At the time of publishing, we had not received a reply, but we will continue to report on this developing story. 

UPDATE, May 25, 2024, 1:07 PM:

“Insurance is designed to mitigate loss when a casualty happens. Nevada has been hard hit by wildfires in all parts of the state. We have seen the challenges that occurred in Florida after Hurricane Andrew and the difficulty that ensued to insure properties, particularly residential homes. I am deeply concerned for the challenges our property owners are experiencing. I would also be concerned with government intervention into the private marketplace. I am committed to working with Insurance Commissioner Kipper, stakeholders, and my colleagues to resolve this difficult and challenging situation for all property owners in Nevada,” Assemblywoman Heidi Kasama told The Globe.