And they are, but not because of the fire.

It’s because of the growing number of what the insurance industry defines as “catastrophes,” which has been mostly hail in recent years.

A catastrophe is generally defined as any natural event in a region that will cause $25 million or more in insured losses.

“Colorado is now in the top 10 states for the percentage of claims that are catastrophes,” said Carole Walker, executive director of the Rocky Mountain Insurance Information Association. “You always think of Florida and California as the states with catastrophes.”

She said hail and wind are the primary causes of catastrophe in Colorado.

“We’re right in hail alley,” she said.

On June 6 and 7, two major hailstorms damaged roofs and flooded cars throughout the state. Insurance companies paid out more than $321 million in hail claims.

“That’s almost as much as the Waldo Canyon fire,” Walker said.

A top-10 catastrophe ranking can only mean one thing.

Colorado homeowners have seen or will soon see double-digit percentage increases in their insurance premiums, Walker said.

“The good and bad thing about insurance is that it’s based on patterns and events over time,” she said. “Insurance companies don’t take one wildfire or one hailstorm and base premiums on that.”

Instead, evaluators look back at historical trends and measure their exposure to loss based on past claims.

The trouble is that the number of Colorado catastrophes has surged in recent years.

About 41 percent of all claims in Colorado between 1997 and 2011 resulted from a catastrophe, according to the Insurance Research Council.

Market shifting

The premium increases have a growing number of homeowners shopping around for better prices.

Colorado Springs State Farm agent Dave Powell said he’s been getting a lot of calls. He also said State Farm has not raised rates or announced intentions to, but he still expects they will.

Some insurance companies might have raised rates in response to the wildfires this summer, but most are not so reactionary, he said. They have reserve funds to guarantee there will be enough money to pay for catastrophes and build the reserves into their regular rates.

Insurance companies have always known wildfire was a risk in Colorado Springs and most factored that risk into their rates.

About 90 percent of Waldo Canyon fire claims were settled by early January, and insurance companies had paid out $352.6 million, Walker said.

“We knew there was going to be a big event in Colorado Springs sometime because the city is in a wildfire area,” Powell said. “But wildfire does not drive rates here. How often does the Waldo Canyon fire happen? Once every 20 or 30 years, maybe. But it hails every year.”

In 2009, Walker said insurance companies had their worst year in the state. They paid out $1.4 billion in claims resulting from three major hailstorms. They paid out $1.67 in claims for every $1 they collected in premiums that year, Walker said.

Insurance companies look back 10 to 20 years when predicting future exposure to loss. And most haven’t even factored the wildfires into their equations yet, she said.

Current rate increases are the result of increased risk in the state that insurers felt even before the fires.

More regulation?

Now that the state is among those with the most catastrophes, Walker said she worries spikes in premiums could spur lawmakers to tighten regulations on insurers.

“We still have 200 insurance companies writing and selling insurance in the state,” Walker said.

Those companies might start raising rates for people who live in higher-risk areas, but they will probably continue writing policies, Walker said.

“As long as we can maintain a friendly business and regulatory market for them, that should continue,” she said. “But if it gets too heavy-handed like you see in Florida, I worry people in higher-risk areas could lose access.”

There is nothing currently proposed in the Colorado Legislature that would more tightly regulate the insurance industry, Walker said. But she expects lawmakers to bring something up this year that could change or limit the types of policies insurers could offer in the state.

“What we fear is that insurance companies might just not want to be in the market,” she said.

Catastrophic Colorado

  • The state has seen a sharp increase in catastrophes, defined as any natural event that will result in $25 million or more in insured losses.
  • Wildfire caused about $450 million in insured losses in Colorado in 2012.
  • Hail accounted for $321 million of insured losses in 2012.
  • Three hailstorms caused $1.4 billion in damage in 2009, the state’s most expensive season.

Colorado Insurance Market

Top five insurance companies in Colorado by market share:

  • State Farm Insurance
  • Farmers Insurance
  • American Family Insurance
  • Allstate Insurance
  • USAA