- Surge in California Homeowners Insurance Sales: California’s surplus lines homeowners insurance market expanded dramatically from about 50,000 policies in 2023 to 320,000 in 2025, indicating a permanent shift of risk away from standard carriers.
- Shifting Market Dynamics in California: Insurance activity is now reaching into urban and suburban areas, with middle-market homeowners increasingly turning to surplus lines as traditional carriers withdraw, reflected in the dropping average home value in the market.
- Returns of Standard Insurers with Higher Rates: California insurers like Farmers, CSAA, and Mercury are returning by raising rates and expanding coverage, with some companies planning to increase rates by nearly 7% in 2026.
- Rate Regulation Efforts in Illinois: Illinois is trying again to pass legislation to give regulators the authority to review and approve insurance rates, following insurer hikes like State Farm’s 27.2% increase, to protect consumers from excessive charges.
- Impacts on Homeowners and Market Outlook for 2026: While national premium growth is decelerating, some markets like Mississippi and Florida continue to see high rate increases; homeowners are advised to shop around annually for the best insurance deals to manage costs.
California’s surplus lines homeowners insurance market grew from roughly 50,000 new policies in 2023 to 320,000 in 2025, a surge of more than 500%, according to the 2025 annual report from The Surplus Line Association of California (SLACAL), released earlier this month. The association describes the expansion not as a cyclical correction but as a permanent reallocation of risk away from the standard admitted market, marking a new phase in how California homeowners access coverage.
The pullback by admitted carriers is no longer confined to rural or high-wildfire zones. SLACAL’s data shows that personal lines surplus activity now extends into urban and suburban areas, with the average assessed home value in the surplus market dropping from $900,000 in 2024 to $800,000 in 2025. That shift means middle-market homeowners, not just owners of multimillion-dollar properties in fire-prone hillsides, are increasingly landing in surplus lines simply because standard carriers won’t write the policy.
Admitted Carriers Start to Return, at a Price
California’s regulatory apparatus is attempting to reverse the tide. The state’s Sustainable Insurance Strategy, which allows carriers to incorporate catastrophe modeling and reinsurance costs into their rate filings, has coaxed some insurers back to the table. Farmers Insurance announced in late 2025 that it would eliminate its cap on new California homeowners policies and plans to begin marketing directly to roughly 300,000 consumers in areas the Department of Insurance has designated as distressed. CSAA and Mercury Insurance are expected to raise rates by an average of 6.9% in 2026, CSAA starting in March across nearly 482,000 policyholders, and Mercury beginning in July for more than 650,000 policyholders.
The Center for Climate Integrity estimates that if all pending rate increases are approved, the average California policyholder will pay $1,015 more for homeowners’ insurance in 2026 than in 2023. State Farm, which stopped writing new California policies in 2023 and nonrenewed thousands of customers, received a 17% rate increase last year after requesting 22% following the Eaton and Palisades fires.
Meanwhile, Illinois Takes Aim at Rate Regulation
The tension between insurer pricing power and consumer protection is playing out far beyond California. In Illinois, lawmakers are preparing a second attempt to pass legislation that would give the Department of Insurance the authority to review and approve homeowners’ insurance rates, according to Capitol News Illinois. The bill, filed by Rep. Robyn Gabel, passed the Senate during last fall’s veto session but fell four votes short in the House. It could be called for another vote as early as this week.
The push was triggered by State Farm’s announcement of a 27.2% average rate increase for Illinois homeowners, which the insurer attributed to weather-related losses. Consumer advocates point out that Illinois is the only state in the country without a law prohibiting insurers from charging rates deemed excessive, inadequate, or unfairly discriminatory. The proposed bill would preserve the state’s existing use-and-file system; carriers would not need advance approval, but wouldbe required to give 60 days’ notice before implementing increases of 10% or more, and would give regulators the power to order rebates if rates are later found to be unjustified.
What This Means for Homeowners
The national picture heading into 2026 is one of uneven stabilization. After several years of double-digit premium increases, the rate of growth is slowing. Matic reported that new policy premiums rose 8.5% year over year in 2025, down sharply from 18% in 2024. Swiss Re projects growth to slow further to around 3% in 2026, though Cotality’s forecast is more pessimistic at 8%. The quiet 2025 Atlantic hurricane season, which saw no major U.S. landfalls for the first time in a decade, is giving some reinsurers room to ease terms.
But stabilization at the national level does not translate to relief in the markets that need it most. In Mississippi, the state wind pool, insurer of last resort for six coastal counties, approved a 17.2% rate increase on dwelling policies effective January 2026, following a 14.8% increase in 2024. Florida’s premiums remain the highest in the nation at an average of $7,136 per year, according to Insurance.com. However, the state did see a modest 6% decline over two years as litigation reforms and new market entrants took hold. For homeowners trying to compare options across a shifting landscape, shopping multiple carriers remains the most effective lever. According to a Kin survey, 19% of homeowners plan to switch providers this year, and the gap between the cheapest and most expensive quotes for the same property can run into the thousands. Reviewing competing homeowners insurance quotes annually, especially before renewal, is no longer optional for cost-conscious homeowners; it’s a financial necessity.
