Insurance Moves Upstream in Homebuilders’ Land Decisions

For years, builders treated insurance as a back-end detail — something to finalize at closing after the hard work of land acquisition, entitlement, design, and construction was done. But in 2025, insurance has moved upstream.

For many projects, it’s now one of the earliest — and most decisive — tests in the new-home building lifecycle pipeline.

The change isn’t voluntary.

In market after market, the insurance retreat from high-risk geographies has become impossible to ignore. Carriers are shrinking their footprints or walking away altogether from areas they once served reliably. In California, carriers like State Farm and Allstate have scaled back dramatically in wildfire-prone ZIP codes. In Florida and the Gulf Coast, repeated hurricane losses and skyrocketing reinsurance costs are pushing companies to cap or eliminate new policies. Even in the Midwest, where serial hailstorms are driving up claims, carriers are reassessing their appetite for exposure.

Where once builders simply baked insurance premiums into sales price models, many now find themselves facing a more fundamental question before grading begins: Can this community be insured at all—and at a price buyers can afford?

A lot of carriers have just become stricter and wary of new projects,” says Arvin Darilag, Vice President of Business Development at Westwood Insurance Agency. “It went from different levels of risk they were willing to take, to now just not wanting to take on any risk at all.”

A Moving Target

What’s striking is that carrier reluctance is no longer confined to the obvious hazard zones flagged by FEMA maps or municipal planning departments. In many cases, insurers are declining communities that may not show clear signs of elevated risk.

We’ve submitted communities where the fire risk appeared to be relatively low, but some carriers have still opted not to move forward,” Darilag notes.

This unpredictability has real-world consequences. Deals that pencil out at acquisition can fall apart when a late-stage insurance review results in premium spikes, policy exclusions, or outright denials. In some cases, developers are forced into last-minute changes—altering product design, shifting building materials, or even abandoning a phase of development—to secure coverage.

Authorities including the Office of Financial Research (OFR) and the Insurance Information Institute report that numerous carriers have begun limiting or refusing to write new policies in high-risk areas—and many have submitted rate-increase filings for remaining coverage. For builders, the twin pressures of reduced availability and higher cost are colliding with an affordability crisis already shaped by high mortgage rates, land scarcity, and labor constraints.

From Price to Possibility

In this environment, the nature of the insurance conversation has shifted.

In the last three to five years, builders have shifted from just looking at the cost of insurance to the actual insurability of the homes,” Darilag says. “It really comes down to two questions for us: insurability and cost.”

That evolution mirrors a broader shift in land planning priorities. Risk evaluation is no longer something to hand off to a closing coordinator; it’s becoming a discipline in its own right—one that belongs in the same early-stage due diligence bucket as geotechnical reports, traffic studies, and market absorption analyses.

Some builders have already started to adapt.

Some divisions—especially in California—reach out to us not only shortly after purchasing land, but even beforehand, to understand the insurability of a potential project,” Darilag says. “These early conversations can play a key role in shaping what kind of home gets built, whether it’s single-family or multifamily.”

The earlier those conversations happen, the more flexibility teams have to address potential coverage obstacles—whether by altering site design, adjusting community layout, or specifying different materials.

A Harder ‘No’

But even proactive planning has its limits.

At the moment, carriers are largely declining coverage,” Darilag notes. “It can feel discouraging as builders may not see a clear path to influencing those decisions, but that doesn’t mean opportunities for collaboration and change aren’t possible.”

Underwriting decisions are increasingly driven by portfolio-level exposure management rather than the merits of a specific site. If a carrier’s book of business is already overweight in a certain county or hazard zone, even low-risk projects there can be shut out.

The result: builders need not only project-level strategies, but also a broader understanding of carrier capacity and appetite in their target markets. That means forging relationships with insurance partners who have direct visibility into carrier decision-making criteria—and who can flag emerging red lines before deals advance.

Designing for Resilience and Insurability

While underwriting appetite may be tightening, Darilag says there are still ways for builders to strengthen their case. Increasingly, carriers are rewarding tangible, verifiable risk-reduction measures in project design and materials selection.

We advise our builder clients to keep looking at new ways to build,” Darilag says. “The more carriers see that home builders are using fire-resistant or wind-resistant materials, the more they’ll consider opening capacity or lowering premiums because the risks are being mitigated.”

That includes strategies like:

• Defensible space in wildfire zones, including vegetation management and non-combustible hardscaping.
• Impact-resistant roofing and siding in wind- and hail-prone regions.
• Elevated foundations and drainage systems in flood-risk areas.
• Underground utilities to reduce exposure to storm damage.

Such features not only improve insurability—they also deliver value to buyers, who are increasingly aware of climate risks and may be more willing to pay for homes designed to withstand them.

Insurability as Part of Infrastructure

The core takeaway from this shift is that insurance should be treated like infrastructure. Just as a development can’t proceed without roads, utilities, and drainage plans, it shouldn’t proceed without a clear, validated path to insurability.

That mindset might call for a “Land Insurability Pre-Flight Checklist” embedded in the earliest phases of due diligence. While every market and project will have unique considerations, a baseline checklist might include:

1. Hazard Mapping Review – Cross-reference site location with FEMA flood maps, state wildfire hazard zones, and NOAA storm surge projections.
2. Carrier Appetite Scan – Identify which insurers are actively writing in the area and their risk thresholds.
3. Reinsurance Market Signals – Track how global reinsurance trends may impact local carrier capacity.
4. Material and Design Standards – Integrate resilient building materials and site planning to mitigate specific regional risks.
5. Infrastructure Resilience – Assess public and private infrastructure support for risk mitigation (e.g., fire suppression systems, levees).
6. Cost Scenarios – Model both current and projected premiums under varying climate and market conditions.
7. Exit Strategy – Build contingencies for insurance availability into acquisition and sales agreements.

Westwood, Darilag says, is increasingly being brought in as a consultative partner as homebuilders and their developer partners strategize on land acquisition and development planning — not just as a transactional provider at closing.

Why Now Matters

The timing for integrating insurability into land planning couldn’t be more urgent. The combination of higher borrowing costs, land price inflation, and carrier pullbacks means builders have less room for error. A project delayed or derailed by insurance issues not only wastes capital but can also create reputational damage with investors, municipal partners, and buyers.

This isn’t just a problem for coastal states or obvious hazard zones. Hailstorms in Colorado, derechos in Iowa, and ice storms in Texas have all triggered massive claims events in recent years, prompting insurers to rethink exposure in places once considered safe bets.

For builders and developers, that means the old playbook—secure the land, win the entitlements, then figure out the insurance—no longer works. Insurability is now a go/no-go criterion from day one.

The Strategic Opportunity

While the tightening market presents clear risks, it also creates an opening for builders who can demonstrate proactive risk management. Builders that develop a track record of delivering insurable, resilient communities may become “preferred risks” for carriers—a status that could yield better pricing, more stable coverage options, and faster underwriting approvals.

That, in turn, can become a selling point for buyers. In an era where homeowners’ insurance premiums can rival property tax bills, the promise of a well-insured, risk-mitigated home is a tangible value proposition.

The take-away

The ground has shifted. Insurance is no longer a box to check at the end of a project—it’s a foundational element of land strategy. Builders who treat insurability as part of their infrastructure planning will be better positioned to navigate the carrier retreat, control costs, and keep projects moving from dirt to delivery.