Recent Natural Disasters Have Reshaped the Market
What Investors Can Do to Protect Their Portfolios
by Scott Phillips
The United States has seen a surge in natural disasters presenting major challenges for rental property investors. From severe flooding in North Carolina to devastating wildfires in California and an increase in wind, hail, and deep freeze events across the Midwest, these disasters are reshaping the real estate insurance landscape.
As an executive in one of the largest MGUs in the REI sector, I have seen firsthand how shifting underwriting guidelines and rising losses have led to fewer options and higher costs. Investors must now take a more strategic approach to risk management to protect their portfolios.
The frequency and severity of natural disasters have increased significantly. In 2024, the U.S. experienced 27 billion-dollar weather events, causing $182.7 billion in damages. This marks a sharp rise compared to previous decades, driven by climate change, rapid development in high-risk areas, and inflation in construction costs. For real estate investors, the impact goes beyond the immediate damage. As insurers assess growing losses, policies are becoming more restrictive, premiums are rising, and coverage is becoming harder to secure.
How Recent Disasters Have Reshaped the Market
Flooding in North Carolina // Hurricane Helene in 2024 caused catastrophic inland flooding, resulting in over 100 deaths and damaging approximately 74,000 homes, with financial losses exceeding $59.6 billion. The National Flood Insurance Program (NFIP) is the main source of flood insurance, but participation remains low, with only about 30% of at-risk homes carrying coverage. Many investors assume that standard property insurance covers flood damage, only to find out too late that they are unprotected.
Wildfires in California // The early 2025 wildfires in Greater Los Angeles—including the Palisades, Eaton, and Hughes fires — burned over 50,000 acres, destroyed more than 17,000 structures, and resulted in at least 28 deaths. Insured losses are expected to surpass $30 billion, further straining an already fragile insurance market. In recent years, insurers have either withdrawn from the state or increased rates significantly, making it more difficult for investors to secure affordable coverage. The California FAIR Plan, a state-backed insurance program, has seen a record number of policies issued as private insurers exit the market.
Wind, Hail, and Deep Freeze in the Midwest // The first half of 2024 saw a series of severe convective storms across the Midwest, bringing intense wind and hail damage. These storms, combined with unexpected deep freezes, caused significant losses and contributed to rising insurance costs. Many insurers responded by increasing deductibles and limiting coverage for wind and hail damage, shifting more of the financial burden onto property owners. States like Texas, Oklahoma, and Missouri have seen some of the steepest increases in wind/hail deductibles, with some policies now requiring a 5% deductible instead of a flat dollar amount.
What Investors Can Do to Protect Their Portfolios
Proactive Risk Mitigation // Insurers increasingly favor property owners who take steps to reduce risk. Implementing mitigation measures can lower premiums and reduce damage in the event of
a disaster.
» Strengthening Properties // Fire-resistant roofing, impact-resistant windows, and fortified structures can significantly improve a property’s ability to withstand extreme weather.
» Landscaping for Fire Prevention // Creating defensible space around buildings by removing vegetation and using fire-resistant landscaping materials can help prevent wildfire spread.
» Elevating Structures in Flood Zones // Raising buildings, installing flood barriers, and improving drainage systems can minimize flood damage.
Monitor Policy Changes and Market Trends // The insurance market is shifting rapidly, with many carriers adjusting their exposure in high-risk areas. Investors must stay informed about industry trends and be prepared to adapt.
» Partner with Experienced Brokers // Insurance brokers with expertise in real estate investment properties can help investors navigate the complexities of the market.
» Explore Alternative Insurance Options // Parametric insurance, which pays out based on predefined triggers like wind speed or flood depth, is gaining traction as a supplement to traditional insurance.
» Consider State or Federal Programs // In areas where private insurers are retreating, state-supported programs like California’s FAIR Plan or the NFIP may be necessary, though they often come with higher costs and limited coverage.
The Challenge of a Hardening Market
The dramatic increase in catastrophic losses has led to a hard market, where insurers are raising rates, tightening underwriting guidelines, and reducing capacity in high-risk areas. States like California, Louisiana, and Florida have been hit hardest, but other regions are beginning to experience similar challenges.
For investors, this means higher costs and fewer options. In some cases, properties may become nearly uninsurable through standard markets, forcing investors to seek alternative solutions. This shift highlights the need for long-term planning, rather than reacting to changes as they occur.
A Smarter Approach to Insurance in Real Estate Investing
The days of viewing insurance as a secondary concern in real estate investing are over. In today’s volatile climate, insurance is a core part of any investment strategy. Investors who take a proactive approach — by securing the right coverage, implementing risk mitigation strategies, and staying informed on market shifts — will be in the best position to protect their assets.
The future of property insurance is uncertain, and there’s no one-size-fits-all solution. But one thing is clear: investors who fail to plan for risk will find themselves facing limited coverage options, higher costs, and greater financial exposure when disaster strikes. Those who take a strategic, informed approach will not only protect their portfolios but also
position themselves for long-term success in an evolving market.
