The Insurance Crisis Is Pushing Landlords to Sell: What Exchangers Are Doing

Insurance has become the line item that decides whether a rental cash-flows. Treasury’s Federal Insurance Office found that homeowners premiums rose 8.7% faster than inflation nationally between 2018 and 2022, and at least 14.7% faster in the top fifth of ZIP codes. Florida’s market has stabilised since its 2023 reforms while the state-created insurer of last resort shrinks; California’s FAIR Plan has grown 146% since 2022 and took a $1 billion assessment after the Los Angeles fires. Owners in both states are selling and exchanging into properties, or trust interests, in markets where the renewal letter is not the biggest risk on the balance sheet. This post gives the sourced numbers and the paths.

What the federal data shows

The Federal Insurance Office’s January 2025 report, Analyses of U.S. Homeowners Insurance Markets, 2018-2022, is built on more than 246 million policies aggregated to ZIP code. Its findings:

• Average premiums per policy rose 8.7% faster than inflation nationally; in the top 20% of ZIP codes they rose at least 14.7% faster, while in the bottom 20% they fell at least 1.4% relative to inflation.
• Consumers in the 20% of ZIP codes with the highest expected climate-related losses paid an average of $2,321 per policy, 82% more than the lowest-risk fifth.
• Nonrenewal rates rose in 2022, “suggesting many consumers found it more difficult and challenging to purchase insurance.”
• Insurers’ paid loss ratio was 18% higher in the highest-risk ZIP codes despite the higher premiums, with average claim severity of about $24,000 against $19,000.

The data covers owner-occupied policies, not landlord policies, but it is the only national series of its kind and it maps where the pressure is.

Florida: stabilising, with a smaller safety net

The Office of Insurance Regulation’s Property Insurance Stability Report of July 1, 2026 reports that for residential policies effective in 2024 or later, 44 companies have requested rate decreases and 48 have requested 0% changes; that Florida domestic property insurers posted a pooled combined ratio of 83% in 2025, the lowest in more than a decade; that 21 new companies have been approved to write residential property since the reforms; and that preliminary 2026 data suggests reinsurance costs at least 10% lower than 2025. The state-created insurer of last resort, Citizens, held 293,465 policies on June 5, 2026, “the lowest level in 25 years,” down from nearly 1.2 million at the end of 2022.

For a landlord the 2026 legislation matters more than the rate trend. Chapter 2026-150, approved June 16, 2026, requires Citizens to run commercial clearinghouses by January 1, 2027. A commercial residential risk, which is how an apartment building is written, becomes ineligible for Citizens once an authorised insurer offers comparable coverage at no more than 20% above Citizens’ price; a nonresidential risk becomes ineligible on any authorised offer. Owners who have been parked in Citizens should expect to be moved to the private market at whatever price that market sets.

California: the FAIR Plan as the market

The Assembly Insurance Committee’s January 28, 2026 oversight hearing background records the FAIR Plan at 668,609 policies in force in December 2025, up 146% since September 2022, with $724 billion of exposure, up 230% over the same period, and about 6% of the state’s property market. Commercial policies are capped at $20 million per structure and $100 million per location; residential at $3.3 million. After the Palisades and Eaton fires the plan handled about 5,400 claims and paid nearly $3.5 billion, and on February 11, 2025 it assessed its member insurers $1 billion, part of which is being recouped from other policyholders over 24 months.

The Department of Insurance’s February 2, 2026 release announcing the Make It FAIR Act, AB 1680, puts total claims paid since the January 2025 fires at $22.4 billion and lists 17 critical compliance failures found in the department’s examination of the plan. A landlord whose only available coverage is a FAIR Plan policy with a dwelling cap is carrying both a cost problem and a lender problem.

Gulf states beyond Florida face similar pressures; we have not verified current state data for them and leave them out.

How insurance moves through a sale

Three channels. Cash flow: a premium that doubles comes straight out of net operating income, and buyers price the property on that income. Financing: lenders require coverage at replacement cost, and a FAIR Plan cap or a nonrenewal can stall a buyer’s loan. Buyer pool: the owners most able to absorb a premium shock are large and well-insured, which narrows who bids. A hypothetical Florida fourplex with $60,000 of net operating income before insurance and a premium rising from $8,000 to $20,000 drops to $48,000; at a hypothetical 6% cap rate that is $200,000 of value. Run your own numbers with your CPA.

What exchangers are doing

• Exchanging to lower-risk markets. The planned guides on exchanging out of a high-risk market and moving to a landlord-friendly state cover the state-level questions, including claw-back by the old state.
• Exchanging into a traditional DST, where the trust holds institutional property with full-service management in place and the insurance is underwritten at the sponsor level. A DST interest is illiquid and sponsor-controlled, and its income depends on the trust’s tenants; it removes the renewal letter from your mailbox, not the risk from the property.
• Using section 1033 after a loss. If the property was destroyed rather than sold, the involuntary-conversion rules give a longer replacement window than section 1031; see what to do when property is condemned or destroyed and using a DST for 1033 proceeds.

What to do now

1. Pull three years of premium history and the current renewal quote, and recompute net operating income on the new number.
2. If you are in Florida’s Citizens on a commercial residential policy, find out before January 1, 2027 what the private market will quote; eligibility changes on that date.
3. Model the exchange against holding, using the state pages for Florida and California.
4. Request a proposal if the renewal is already unaffordable; the 45-day clock does not wait for a quote.

Sources

• Federal Insurance Office, Analyses of U.S. Homeowners Insurance Markets, 2018-2022 (January 2025)
• Florida Office of Insurance Regulation, Property Insurance Stability Report, July 1, 2026
• Florida Senate, CS/CS/SB 1028 (2026), Chapter 2026-150
• California Assembly Insurance Committee, Oversight Hearing: The California FAIR Plan (January 28, 2026)
• California Department of Insurance, press release of February 2, 2026 on the Make It FAIR Act