By Ted Andersen, SAN FRANCISCO BUSINESS TIMES
The bulk of San Francisco homes may not be located in forested areas, but when it comes to fire insurance, that doesn’t mean homebuyers in the city are out of the woods.
Not only did the Palisades and Eaton wildfires in Los Angeles decimate entire suburban neighborhoods, but they also extinguished any hopes of fire insurance relief for urban centers like San Francisco where risks remain low but premiums are rising.
Buyers have had a difficult time with insurance in California, according to the California Association of Realtors, which found that in 2024 about 13% of agents in the state had a transaction terminate due to the inability to find comprehensive, affordable homeowners insurance.
The insurance landscape in California changed over the past decade and homes all over the Bay Area have felt the pinch. As big carriers have pulled out, insurance has gotten more expensive and harder to pin down – if at all in some cases.
As a result, homebuyers in San Francisco must be twice as cautious in procuring insurance, according to a number of San Francisco real estate brokers I spoke with.
Compass agent Val Steele said that it’s important to understand that the insurance landscape will continue to be a challenge, particularly in light of the recent fires down south. These ongoing concerns are expected to affect the cost and availability of homeowners’ insurance, she said, and it’s a factor that both sellers and buyers should be mindful of in 2025.
Steele said that younger, first-time buyers who are feeling the impact of elevated interest rates will likely also feel that impact of insurance the most.
Nina Hatvany, president of Compass S.F.’s Luxury Advisory Group, said that while she’s seen more general optimism to start 2025 in the city, this particular problem hasn’t gotten any better so far this year.
“Insurance is a big issue in San Francisco and everything that has happened in Los Angeles has made insurance even more difficult,” she said. “It is hard to get an insurance agent’s attention and the requirements seem to be becoming more and more onerous.”
The state’s newly announced regulations for insurance companies are focused on wildfire catastrophes and do not require public disclosures from insurance companies regarding that computer modeling, according to Carmen Balber, executive director of Consumer Watchdog. Catastrophe modeling is controversial because insurance companies tend to use proprietary models to set rates which are not transparent.
As such, many of these modeling and premium cost-adjustment issues have yet to fully take shape.
“We had a Q&A with our go-to insurance broker several months ago that continues to be watched and shared by our clients,” Vantage Realty founder Mary Macpherson said, noting that whether a buyer can affordably insure their home will continue to play a major role in the housing market. “It’s an issue that doesn’t seem to have any foreseeable resolution.”
KW Advisors agent Jennifer Rosdail told me fire insurance in the city has been more expensive but not impossible to get. However, homes with prior claims that an insurance company knows about will have hard time getting insurance, she said.
Rosdail said that the size of the Los Angeles claim pool will no doubt affect Bay Area rates in time. “When something this big affects LA, it has a bigger ripple,” she said.
Rosdail pointed to the 1994 Northridge earthquake, which was considerably more costly than the 1989 Loma Prieta quake with an estimated $20 billion in damage, as the catalyst that eventually led to earthquake insurance being unbundled as its own policy in California.
City Real Estate’s Alexander Fromm Lurie – the half-brother of San Francisco’s new mayor – told me that in terms of the Los Angeles wildfires’ effects on San Francisco, he thinks it’s too early to tell but believes that there certainly will be an impact. Overall, though, he’s hearing chatter about it.
“What I am seeing on the buy side – especially in the luxury market ($5 million-plus) – is that some people are getting a little bit more specific or concerned about where they are located in San Francisco specifically. People are asking questions about defensible space,” Lurie said.
He even noticed an uptick in questions about earthquake liquefaction and bedrock.
“I’m hearing that a little bit more than I did a month ago,” he said. “There’s a lot of sensitivity in the air.”
Lurie’s advice for those who do procure insurance is to make sure that the insurance policy is in the name of the person on the mortgage loan or the deed of the property. For example, if a person has a loan on a trust, it should be the same name on the insurance policy.
“What people sometimes do is they buy in their name and they move it to a trust, and their insurance is in their name but not in the trust,” he said. “Everybody should know about that and people are talking about that. At this point, insurance companies are concerned with solvency and they will do what they can to mitigate losses and this is one way they may – not will – but may circumvent payouts.”