New Mexico lawmakers say fires are driving up the cost of home insurance, making it unaffordable and impossible

As wildfires continue to ravage forests in New Mexico, the state is facing a growing crisis when it comes to providing adequate insurance coverage for homeowners in high-risk areas. At a recent meeting of the Legislative Finance Committee at the Inn of the Mountain Gods in Mescalero, lawmakers and insurance regulators painted a grim picture of the challenges faced by prospective homeowners seeking coverage for properties built in fire-prone regions.

The meeting followed a recent lawsuit filed by the state’s Office of the Superintendent of Insurance against State Farm, New Mexico’s largest insurer, accusing the company of improperly denying claims for losses caused by wildfires in the Ruidoso area. This legal battle highlights the difficulties faced by homeowners in obtaining fair compensation for their losses in the aftermath of devastating fires.

According to data presented at the meeting, some counties in New Mexico have seen significant increases in home insurance premiums in recent years, with rates rising by as much as 47% in certain areas. The average annual premium in the state now stands at $1,817, making it increasingly difficult for homeowners to afford adequate coverage for their properties.

In response to the rising costs and challenges of obtaining insurance, the Office of the Superintendent of Insurance has observed a growing trend of insurers refusing to renew or approve policies in high-risk areas. This has led to a situation where many homeowners are left without the financial protection they need to rebuild and recover from wildfire damage.

Colin Baillio, Deputy Secretary of the OSI, emphasized the far-reaching consequences of this insurance crisis, noting that it could lead to job losses in industries like real estate and construction, hinder economic development, and make homeownership unattainable for entire communities. Despite the profitability of insurance companies in New Mexico, regulators are limited in their ability to compel insurers to provide coverage in high-risk areas.

To address these challenges, Baillio is advocating for risk reduction measures that could help reassure insurers and make it more feasible for them to operate in the state. These efforts include encouraging homeowners to create defensible space around their properties and implementing community-wide improvements to reduce the overall risk of wildfires.

In the face of mounting obstacles to obtaining insurance coverage, lawmakers are exploring options to expand the state’s Fair Access to Insurance Requirements plan, which currently offers limited coverage for owner- and tenant-occupied homes and commercial structures. By increasing policy limits and covering replacement value, regulators hope to make it more attractive for lenders to provide mortgages to homeowners in fire-prone areas.

As New Mexico grapples with the aftermath of devastating wildfires and the challenges of securing insurance coverage in high-risk regions, policymakers are working to find solutions that will protect homeowners, promote economic stability, and ensure the long-term viability of communities affected by these natural disasters. By addressing the root causes of the insurance crisis and implementing proactive measures to reduce risk, the state hopes to create a more resilient and sustainable future for all residents.