(Photo: Aspen Snowmass Sothebys International Realty)

Excerpt from soon to be released: Estin Report H2 & YEAR 2023 Aspen Real Estate: On Property Insurance

Home Insurance in the Mountains

Obtaining home insurance in the mountain west, in Aspen and Snowmass Village, as in many other parts of the country, is no longer a simple or relatively automatic process as before climate warming started affecting our everyday lives.

I spoke to Lisa Baker, a local Aspen agent with Kelly Klee Insurance. She strongly advised that buyers should be checking into home insurance options immediately upon going under contract.

This is high priority due to the numerous insurance issues occurring around the country and in Colorado.

The great irony is that high net worth individuals want to live in climatically high risk areas prone to natural disasters (floods, hurricanes, fire, etc) where insurance is increasingly difficult and expensive to obtain.

Additionally, construction costs nationwide have risen 34% from 2020 to 2023; in Aspen, they’ve increased 50% according to Baker.

In CA, it is practically impossible to get home insurance*. AIG is out of that market, and they are not writing anymore.

Colorado Luxury Insurers are:

  • Chubb
  • AIG
  • Berkley One
  • Pure (“very impressive and making a push for Pitkin County business”.)
  • Cincinnati

Insurers view any property over $1.5M as “luxury” and are going after the client’s “whole account, bundling primary, secondary/vacation homes with auto and umbrellas. They want all your business.”

So what’s the property owner to do?

A number are going the self-insured route: if the house burns down, the owner pays out of pocket for the replacement.

Or they’re purchasing what’s called ENS (Excess and Surplus) policies, say $10-15,000 on a $10M house. In general, this product is outrageously expensive. For insurance co’s, ENS is a growth area at 3X the regular price. And there are CNC** products which can cover large renovation projects.

Condo Insurance

In 2023, Aspen condo associations began experiencing serious insurability issues with very real and significant impacts on HOA’s and special assessments. This condition exists everywhere but in particularly environmentally hard hit areas such as California, Colorado and Florida.

Many companies will not write policies at all anymore and ski areas like Aspen, Snowmass, Vail, Beaver Creek, Telluride and Breckinridge are notably affected due to their inherent fire risk and high property values.

In Aspen, where 90% of condo development took place in the 1960’s, 1970’s and 1980’s, and in original Snowmass Village complexes, the writing is on the wall. These are older structures mostly wood frame without sprinkler systems and located in hot fire zones. Even concrete constructed buildings are unable to obtain insurance. Aspen Square may be the exception as the complex is brick and located in the center of town considered a lower fire risk. HOA’s are searching for ways to make their properties more defensible.

In a letter to homeowners in Oct 2023, Aspen’s The Gant Condominium general manager, Donnie Lee, wrote, “As catastrophic events over the last years have accumulated, it has pushed insurance companies to make strong changes that are having dramatic effects in the market, and these are impacting The Gant.” He continues, “Many other condo properties in the Aspen/Snowmass area, and throughout the state, are having difficulty finding coverage. Most are being forced into the excess and surplus markets which are incredibly expensive. Larger properties have been left underinsured as markets are unwilling to provide higher level coverage or the cost becomes prohibitive.”

In the fall, The Gant announced their HOA costs are up 7X with significant roadblocks thwarting efforts to obtain coverage. In Nov, owners were charged a $15,000 “ Supplemental Assessment” per unit to cover a 566% increase in their property insurance costs. The Gant is moving forward with long term campus planning and possible redesign, for example something like an exterior sprinkler plan.

“The market is in a panic, suffering a high pain point. Insurers do not want to place new business.”  wrote Lee, “This has broad ripple effects across industries, marketplaces…It is not sustainable. In Colorado, most associations have gone to the ENS products.”

*For more on the difficulties facing the home insurance markets, see Jan 8, 24 WSJ article

**CNC Insurance Brokerage is an independent brokerage agency representing many personal lines insurance companies specializing in real estate investment properties.