Colorado Proposes Rules to Tie Wildfire Mitigation to Homeowners Insurance Rates

Colorado is addressing its housing affordability crisis, which is exacerbated by rising property insurance premiums that hinder homebuying. The Colorado Division of Insurance has released draft rules mandating insurers to consider homeowner and community wildfire-mitigation efforts in rate-setting. This regulatory initiative, stemming from House Bill 1182 passed in 2025, aims to increase transparency on how insurers assess wildfire and hail risks, allowing homeowners to understand and implement mitigation measures that may reduce premiums.

Wildfire and hail losses have made the Colorado property insurance market notably unprofitable, with insurers losing money in eight of the past ten years. This has driven an average homeowners insurance rate increase of 76.6% between 2019 and 2024, the highest nationally. Attempts to introduce fee-based grant programs to support hail-proofing and fire protection were rejected due to concerns about increasing costs for residents already facing financial strain.

Industry leaders emphasize the critical need for meaningful mitigation standards to reduce the risk profile sufficiently so insurers can stabilize or lower premiums. Without effective risk reduction, some policies reach economically unsustainable levels — notably, annual premiums of $15,000 on $500,000 homes in high-risk areas.

The draft rules require insurers to disclose property-specific and community-level mitigation actions that can influence premiums. Insurers must provide risk scores and classifications linked to wildfire vulnerability and offer appeal processes for homeowners to demonstrate mitigation efforts to achieve rate reductions.

Mitigation actions recommended include creating defensible space, installing fire- and hail-resistant roofing, and adding fire-resistant siding or vents. Community approaches like undergrounding utility lines, establishing fire breaks, and maintaining staffed fire departments are also recognized for reducing collective risk.

The legislation was tailored to exclude commercial properties except multifamily complexes, reflecting the national rating approaches for commercial insurance. The Colorado Division of Insurance is soliciting public feedback on the proposed forms before a planned July 1, 2026 implementation.

Average homeowners insurance premiums in Colorado range from approximately $3,000 to $4,500 annually, placing the state among the most expensive nationally. The combined effect of high home prices and escalating insurance costs presents substantial barriers to homeownership and challenges workforce recruitment and retention in the state.

With over 218,000 acres burned in recent wildfires, insurers’ loss exposures and reinsurance costs remain elevated, suggesting ongoing legislative and regulatory discussions will be necessary to balance affordability, insurer solvency, and effective disaster risk management.