USA – IOWA Trends and Developments Contributed by: Benjamin J. Kenkel, Sean M. O’Brien and Blake R. Hanson, Dickinson, Bradshaw, Fowler & Hagen, P.C.
Dickinson, Bradshaw, Fowler & Hagen, P.C. 801 Grand Ave. Suite 3700 Des Moines Iowa 50309-8004 USA
Tel: 515-243-4191 Fax: 515-246-5808
Email: info@dickinsonbradshaw.com Web: www.dickinsonbradshaw.com
Winds of Change: Recent Developments and Emergence of New Trends in Iowa Insurance Law Iowa’s insurance industry has been transformed in recent years by the weather. Not everything, however, has been about the weather. This article examines key weather- and non-weather-related insurance develop- ments in Iowa. Consolidation and coverage changes in the property insurance market On 10 August 2020, a derecho travelled across Iowa and impacted several other Midwestern states. Dere- chos are fast-moving bands of thunderstorms with destructive winds akin to an inland hurricane. This record-setting storm resulted in more than 200,000 Iowa insurance claims, with losses ultimately exceed- ing USD3 billion. Losses across the region totalled USD11 billion, making it, at the time, only the third severe weather-related event to surpass USD10 bil- lion in damage. This derecho highlighted an alarming upward trend of severe convective storm (SCS) events in the Midwest. For example, between 2016 and 2019, there were 1,232 reports of hail in Iowa, with 77 events involving hailstones exceeding two inches. Between 2020 and 2023, the number of reports of hail remained consistent at 1,271, but the number of hailstone events involving hailstones of two inches or more nearly doubled to 145. The timing of the uptick in inclement weather could not have been worse for Iowa’s insurance industry. Iowa ranked among the five worst states for home- owners insurance profit margins from 2013 to 2022, with an annual ten-year return of -13.2%. Global rein-
surers experienced a period of weak or depressed profitability from 2017 to 2020, resulting in a hard mar - ket where reinsurance became scarce and expensive. This resulted in a trickle-down effect on regional and then local levels. Farm mutuals were hit the hardest. Grinnell Mutual Reinsurance Company (GMRC), Farm- ers Mutual Hail (FMH), Wisconsin Reinsurance Com- pany (WRC) and broker Guy Carpenter at one time provided reinsurance for more than 95% of the farm mutual industry . By 2024, FMH exited the reinsurance market, and WRC went out of business. GMRC and Guy Carpenter did not have the capacity to plug the gap, leaving 20% of the market with no coverage for 2024 renewals. Rising reinsurance rates and the increased frequency of SCS led to a period of market contraction and con- solidation. Our firm closed 14 mergers involving Iowa County or State mutuals effective 1 January 2024, and another seven mergers effective on or before 1 Janu- ary 2025. Six personal lines insurers ceased doing business in Iowa from 2022 to 2024, while several others issued moratoriums or limitations on new busi - ness. The insurers continuing to do business in Iowa responded to the reinsurance crisis with a multifac- eted approach involving higher premiums, increased wind/hail deductibles, cosmetic damage endorse- ments, movement towards actual cash value limita- tions for roofs or even all structures, and underwriting efforts to decrease concentration of risk. The Insured Homeowner’s Protection Act The Iowa Insurance Division championed new legisla- tion to address concerns with the handling of insur-
320 I NSURANCE L I T IGATI O N 2026
CHAMBERS.COM
Powered by FlippingBook