Skip to main content

Impacted by wildfires or winter weather? Whether you have a business that's been affected or your personal home and assets are damaged, know that you have a team of people to support you. Find resources here.

January 28, 2025

The Southwest Faces a Dynamic Insurance Landscape in 2025

Insurers are pulling back the reins in response to the severe weather across the Southwest: Texas, New Mexico, Oklahoma, Arkansas, and Louisiana.

Summary

  • Severe weather—including damaging hail, tornadoes, wildfires, winter ice storms, flooding, and hurricanes—is becoming more frequent and intense in the Southwestern United States.
  • Homeowners and automobile owners in the Southwest are facing rising insurance premiums due to an increase in extreme weather events that cause significant damage to property, medical expenses, liability litigation costs, and a rise in accidents.
  • Carrier appetites are also changing dramatically, with new coverage minimum requirements needed to qualify for a company, tighter underwriting, stricter guidelines for insureds, and limits or restrictions on difficult-to-insure areas.
  • In response, state legislatures are implementing or considering ways to stabilize and improve their communities’ disaster resilience.

With a low cost of living, flavorful cuisine, and a temperate climate, the Southwest attracts many homeowners. Between 2010 and 2020, more than 4.4 million people moved to the region, with growth concentrated in Texas urban centers. Texas is home to four of the top 12 largest cities by population size in the United States: #4 Houston (pop. 2,314,157), #7 San Antonio (pop. 1,495,295), #9 Dallas (pop. 1,302,868), and #12 Austin (pop. 979,882).

The growth in the state and the Southwest are experiencing means newcomers may not be aware of the region's vulnerability to natural disasters and liability risks, as well as the steps they should take to protect their property and assets.

Fire, ice, tornadoes, and hurricanes

Homeowners in the Southwest, particularly in Texas, need to be prepared for extreme weather events, such as wildfires, ice storms, and hurricanes. 

Wildfires:

  • Drought conditions have fueled wildfires throughout the Southwest.
  • The 2022 Hermits Peak/Calf Canyon Fire was one of the largest in New Mexico's history, burning over 341,000 acres. In 2023, more than 333,000 acres burned in Texas. In 2024, the Smokehouse Creek Fire became the largest wildfire in state history, burning across several counties in the Texas Panhandle and destroying hundreds of homes.
  • Even Louisiana was not immune; the National Significant Wildland Potential Outlook indicated that it too experienced above-normal fire activity.

Severe Winter Weather:

  • In 2021, an unprecedented winter storm hit Texas, leaving millions without power. The storm and its impacts were so devastating that it was named “The Great Winter Freeze.”
  • In 2024, a brutal winter storm left 180,000 people in Arkansas without power. This same storm also disrupted power lines and damaged infrastructure in Louisiana.
  • Windstorm and hail damage are also common in this region. In the spring of 2023, hailstorms affected numerous counties across north-central Texas, leaving significant hail and wind damage in their wake. The damage was part of a broader pattern of severe weather that affected multiple southern states, including Louisiana and Oklahoma.
  • A storm in mid-January 2025 prompted the first-ever blizzard warnings for several coastal counties near the Texas-Louisiana border.

Hurricanes:

  • In 2017, Hurricane Harvey struck, causing catastrophic flooding in Houston. It moved inland and produced heavy rain and flash flooding in Louisiana, Arkansas, and even parts of New Mexico and Arizona.
  • More recent Category 4 hurricanes—like Hurricane Laura in 2020, Hurricane Ida in 2021, and Hurricane Ian in 2022—have caused significant damage and flooding across Louisiana and Texas.

Tornadoes:

  • In 2024, Oklahoma’s severe weather events made headlines, with nearly 200 tornado warnings issued statewide—the highest number in the nation that year.
  • In late April 2024, a slow-moving storm over Texas and Oklahoma spawned an outbreak of 39 tornadoes.

The cost of these events is high. Take Oklahoma, for example. Between 1980 and 2024, there were 115 confirmed weather and climate disaster events, with losses exceeding $1 billion each that affected the state.

These extreme weather events can lead to damaged roofs, flooding, broken pipes, and total property loss. However, homeowners and buyers can mitigate their risk through smart retrofits and upgrades, such as installing a new roof or replumbing when updating or building new construction.

Our Risk Advisory team is dedicated to helping you make the right decisions to build homes that are more resilient to the regional threats of hurricanes, wildfires, severe convective storms, and extreme winter weather events.

Climate change is expected to lead to increased temperatures, prolonged droughts, and more frequent and intense wildfires in the region. These changes will heighten the risks of property damage and loss. 
 

Client Advocacy During Catastrophes

  • A family office had many members who owned multiple properties and automobiles, all located within the same severely damaged area.
  • Managing home and auto claims for multiple family members was made
    extra challenging due to the devastated area being initially inaccessible to all claims adjusters.
  • Our MMA PCS claims advocacy team streamlined communications and the claims process by designating single points of contact and resources for the family office.

Navigating the hard market: rising insurance premiums and coverage challenges

As claims related to natural disasters rise in the region, the Insurance Information Institute predicts that insurance premiums may increase and that companies may offer less coverage in high-risk areas. Right now, the Southwest states are already experiencing a hard market, meaning it is more difficult for residents to find coverage.

Common stories include rate hikes on existing policies, non-renewal notices, and challenges in obtaining new coverage. These staggering stats further highlight the difficulties faced in the region:

  • The average cost of home insurance in Texas skyrocketed to $5,180 annually for a home valued at $400,000. This represents a staggering increase of 54.5% over the past five years, making Texas one of the states with the highest rate hikes in the nation.
  • In New Mexico, homeowners' insurance rates have increased significantly, with an average rise of 8.3% in 2023. Additionally, from May 2021 to May 2023, home insurance premiums in New Mexico surged by 47%.
  • Similarly, the overall trend in both Arkansas and Louisiana is one of rising insurance rates.

Insurers are pulling back the reins and implementing stringent guidelines across the Southwest.

Big vistas and big verdicts

In the U.S., there has also been a roughly 30% increase in liability lawsuits and judgments exceeding $10 million. Such verdicts are often referred to as nuclear verdicts. In the Southwest, the same trend can be seen:

  • Texas: Sixty-three percent of nuclear verdicts over the past decade have been reported in just six states, of which Texas is one.
  • New Mexico: In the past five years, New Mexico’s jury awards have grown to what the Santa Fe New Mexican called exorbitant awards to plaintiffs in personal injury cases. One recent example was the award of $37.2 million to a man involved in a car crash in Santa Fe.
  • Arkansas: A trucking company says it shut down due to its inability to find insurance, a fate they tied to nuclear verdicts in Arkansas.

Nuclear Verdicts: $14.5 Billion in 2023

  • Despite recent legislative efforts to stabilize homeowners' insurance coverage and rates, challenges persist, particularly with "nuclear verdicts," defined as jury awards of $10 million or more.
  • Texas and the Southwest currently lead the nation in these verdicts, with awards reaching $14.5 billion in 2023.
  • This trend is driving up insurance costs, as highlighted by Chubb’s analysis of the impact of third-party litigation on the insurance market.

These big jury awards throughout the Southwest are being watched closely by insurers, and they are impacting costs.

The wild Southwest of cyber attacks

It may truly be the wild west online, with a rise in incidents of identity fraud, theft, and cyber attacks in the Southwest. In 2023, Texas was the most targeted location for cyber attacks, and major industries within the state saw their private information made public. Other stats in the Southwest saw this trend ticking up as well.

In one recent incident, hospitals in Oklahoma, New Mexico, and Texas were victims of a severe ransomware attack and had to divert patients to other locations. In Louisiana, there was a staggering data breach where all residents with a state-issued driver's license, ID, or car registration likely had their name, address, Social Security number, birth date, and driver's license number, along with more data, exposed to the cyber attackers. Given this, residents of these states may wish to consider cyber insurance.

Homeowner-friendly legislation

As insurance companies react to the severe weather events experienced in the region, so too do state legislatures.

  • In Texas, the legislature has been proactive in addressing these issues by fast-tracking the Texas Fair Plan, which serves as a state-created insurer of last resort.
  • New Mexico legislators have held sessions to discuss how wildfires have made home insurance unaffordable for their constituents and to begin looking for solutions.
  • Arkansas lawmakers are teed up to explore ways to keep rates low for homeowners in their 2025 session.
  • Oklahoma’sStrengthen Oklahoma Homes Act” aims to improve disaster resilience and lower insurance rates for homeowners.
  • The Louisiana state legislature has approved a $45 million incentive program to encourage insurance companies to write new home policies and attract new insurance providers to the market.

Work with a broker who understands the Southwest

These challenges highlight the importance of partnering with a broker who collaborates with multiple insurance companies to provide tailored expert advice and advocacy. This includes the best carrier recommendations, coverage solutions, pricing options, and guidance. The ease of doing business and the peace of mind from being well protected and informed about their program are invaluable.

Our recent insurance benchmarking survey revealed that nearly 70% of individuals are overpaying for coverage while being underinsured. A best-in-class broker can also help mitigate risks and provide solutions to help lessen a client’s exposure. They have resources in other areas that clients may need but don’t know where to turn (e.g., aviation, yacht, fine art, farm and ranch, commercial, and other lines of business). Whether you are purchasing a new home, seeking coverage after a non-renewal, or considering a switch due to rising premiums, we are here to help you navigate your insurance options in New Mexico, Texas, Oklahoma, Arkansas, and Louisiana.

Schedule an insurance review with a Personal Risk Advisor to gain insights into the liability exposures specific to the Soutwhest and ensure you have adequate insurance in place. 

Contributors