Cotality™ Building & Construction Newsletter
Author: Adam Reek- Construction Cost Estimator, Pricing Analysis & Delivery
April 2025
As the world increasingly prioritizes energy efficiency and environmental responsibility, the heating, ventilation, and air conditioning (HVAC) industry is also undergoing significant changes.
With the introduction of the new SEER2 rating system and the shift towards A2L refrigerants, manufacturers and homeowners alike must pay close attention to these developments, which promise to reshape the landscape for air conditioning and heat pump condensing units and split systems.
Updated SEER2 Efficiency Rating System
The Seasonal Energy Efficiency Ratio (SEER) is the standard measure of air conditioning and heat pump efficiency.
In recent years, the methodology of this rating system was updated to reflect more real-world system efficiencies, designed to account for factors that reduce the effective efficiency of a system such as duct friction and leakage. The updated “SEER2” ratings are generally about 5% lower than the previous SEER Rating. In other words, a unit that was previously labeled with a 14 SEER rating would equate to a 13.4 SEER2 rating. A 15 SEER rating equates to a 14.3 SEER2 rating, and so on.
As of Jan. 1st, 2023, new minimum SEER2 ratings went into effect for residential air conditioner and heat pump split systems. The current minimum efficiency ratings are as follows:
- Air conditioning split systems manufactured after 1/1/2023 require a minimum 13.4 SEER2 rating.
- In the Northern US, non-compliant split system air conditioners manufactured prior to this date can still be sold and installed.
- In the Southern US, split system air conditioners installed after 1/1/2023 require a minimum of 14.3 SEER2 rating. Any non-compliant units not sold for installation prior to the deadline must be shipped to the north for installation.
- Heat pump split systems manufactured after 1/1/2023 require a minimum 14.3 SEER2 rating, however units manufactured prior to this date can still be sold and installed nationwide.
What it means for Property Claims
When assessing property damage and determining the appropriate replacement item for an air conditioning or heat pump split system condensing unit, many existing units encountered in the field are likely to be labeled with an older SEER rating for years to come.
To identify the appropriate replacement item, the Estimator will need to convert the older SEER rating to its newer SEER2 equivalent by dividing the SEER rating by 1.05:
- SEER / 1.05 = SEER2
In addition, an Estimator will need to be aware of the current minimum efficiency ratings above, which could necessitate an efficiency upgrade from the damaged unit to comply with current regulatory standards.
Updates coming to Cotality Claims Estimate
To expand and update the options in the Claims Estimate™ tool, we are rolling out an overhauled range of air conditioning and heat pump condensing units and split systems during the first half of 2025. With the goal of allowing the field user to readily identify the most appropriate replacement option, we will offer three tiers of efficiency ranges and six tonnage sizes—yielding a total of 18 configurations for each equipment type. These two pieces of information are easily identifiable on the system’s outdoor condensing unit or with a quick online search of the equipment’s make and model number.
A2L Refrigerant Transition
One of the most significant shifts in the HVAC industry is the transition from older hydrofluorocarbon (HFC) refrigerants, such as R-410A and R-134A, to the next generation of refrigerants known as A2L. A2L refrigerants are designed to have a lower Global Warming Potential (GWP), aligning with global efforts to address climate change.
The production of new HFC refrigerants is currently undergoing a tiered phase-out process. All residential and light commercial air conditioners and heat pumps manufactured after January 1,2025 must utilize A2L refrigerants. For HFC equipment manufactured before this date, a one-year grace period will allow installation until January 1,2026. As the production of HFC refrigerants and replacement parts for older systems declines, maintaining those systems may become increasingly impractical when compared to the cost of system replacement.
What it means for Property Claims
It’s essential to note that A2L refrigerants cannot be used in retrofit situations. If a major component of a split system (such as a compressor, condensing unit, or evaporator coil) is replaced with an A2L-compatible component, the entire system must be replaced. After the January 2026 installation deadline, a replacement of a split system condensing unit will also necessitate replacement of the indoor evaporator coil, and vice versa. The refrigerant line set between the indoor and outdoor units will most likely be able to be reused, however it must be flushed and pressure tested to verify it does not leak. Additionally, due to their slightly higher flammability, A2L refrigerants require new safety measures including leak detection sensors in air handlers and potentially other design considerations to ensure building safety.
While the cost implications of adopting A2L systems remain uncertain, initial reports suggest a potential increase of around 20% vs their HFC counterparts. The final impact will heavily depend on regulatory policies at both the federal and state levels, potential tariffs, and overall market adaptation.
Updates coming to Cotality Claims Estimate™
We will be closely monitoring market pricing for A2L refrigerant-based systems as the transition progresses and will offer further guidance on pricing for A2L systems in the near future. We are also rolling out an expanded suite of updated actions for air conditioning and heat pump split systems which can be used for the replacement of individual system components or complete systems.
Upcoming Standards for Gas Furnaces
Further down the road, we are anticipating increased efficiency standards for gas-fired furnaces, which will be the first such increase since 2007. Effective late 2028, non-weatherized gas furnaces, along with those in mobile homes, will be required to achieve a 95% Annual Fuel Utilization Efficiency (AFUE). Non-condensing gas units (sometimes referred to as 80% furnaces) will no longer meet these minimum standards. These units are easy to identify by their venting style which utilizes a double walled metallic exhaust vent (known as B-Vent). These models have no air intake pipe, and instead simply draw in ambient air from the room to use for combustion. High-efficiency condensing style furnaces are plumbed with two PVC pipes: one for pulling in outdoor air for combustion and another for exhaust.
What it means for Property Claims
Upgrading from a non-condensing furnace to a modern condensing type will require the venting to also be changed, which could involve a roof boot if venting through the roof, as well as the proper capping/abandonment of the old exhaust which are commonly vented into a chimney flue.
Replacement of non-condensing furnaces currently installed in unconditioned spaces such as attics or crawl spaces may not be possible without additional building modifications or relocation of the furnace, due to the increased condensation produced by higher efficiency condensing furnaces.
Additional Updates Across HVAC Equipment Types in Cotality Claims Estimate™
Significant updates will soon be implemented across various equipment types, including air handlers, packaged units, PTACs, mini-split systems, heat recovery ventilators (HRV/ERV), economizers, humidifiers, and boilers and more. The updated suite of options will reflect modern energy efficiency standards, improved consistency within the category, and a more user-friendly approach to identifying the appropriate action and equipment type for various loss scenarios across all segments of HVAC equipment.
The HVAC industry exists at the intersection between environmental awareness, regulatory policy, building technology advancement, construction trends, manufacturing, and global trade. All of these factors will push and pull at the future of the industry. As consumers and industry professionals navigate the continuous changes in HVAC technology, staying informed about these influences and the practical implications for real world property repairs is paramount.
