California sets global standard for insurance resilience as Commissioner Lara finalizes landmark long-term solvency regulation

News: 2026 Press Release

SACRAMENTO, Calif. — Insurance Commissioner Ricardo Lara today finalized the Long-Term Solvency Planning Regulation, establishing a first-in-the-nation framework requiring California-based insurance companies to prepare for climate risks, artificial intelligence, cyber threats, and other emerging challenges that could affect their financial strength and ability to pay claims over the coming decades.

The regulation provides the California Department of Insurance with additional forward-looking information and tools to identify vulnerabilities earlier, strengthen oversight, and address potential financial concerns before they become larger problems for policyholders or the insurance market.

“Climate change, artificial intelligence, cybersecurity threats, and other developments are already reshaping the future of insurance,” said Commissioner Lara. “Waiting until those challenges become crises is not a strategy. We are acting now to ensure insurers are preparing for what lies ahead so they can continue keeping their promises to consumers. Every consumer who pays an insurance premium deserves confidence that their insurance company will be there when they need it most, not only today, but years from now.”

Preparing Insurance Markets for the Decades Ahead

Through Commissioner Lara’s work with the International Association of Insurance Supervisors and other global initiatives, he has helped develop guidance addressing climate-related financial risk, catastrophe resilience, and long-term insurance supervision. The regulation brings those lessons into California’s financial oversight framework within the nation's largest insurance market and draws on Commissioner Lara’s years of international collaboration and forward-looking planning approaches used by financial authorities including the Banque de France, Bank of England, Bank of the Netherlands, Canada’s chief insurance regulator, and the Monetary Authority of Singapore.

California-based insurance companies will now be required to evaluate how climate risks, artificial intelligence, cyber threats, technological disruption, and other developing challenges and opportunities could affect their financial strength, operations, investments, and underwriting strategies over time. Companies will provide the Department with forward-looking information about how they are analyzing and preparing for these risks, with enhanced requirements for companies writing more than $50 million in direct annual premiums nationwide.

Strengthening Consumer Protection Before Crisis Strikes

Every insurance policy is a promise. Consumers pay premiums today with the expectation that insurance companies will financially be able to pay claims tomorrow. The regulation strengthens the ability of regulators to monitor developing risks before they threaten that promise and requires covered insurance companies to prepare for challenges before they become financial vulnerabilities.

“This regulation reflects a simple belief: protecting consumers means preparing for the future, not reacting to it,” said Commissioner Lara. “The questions confronting California are increasingly the same questions confronting insurance regulators around the world. This framework ensures that we are not simply responding to those conversations but helping shape them.”

What Leaders and Experts Are Saying

“Long-term solvency strategies for insurance companies are foundational to financial resilience in the face of technological change and climate threats,” said Yoshihiro Kawai, Chair of Global Asia Insurance Partnership (GAIP) and Southeast Disaster Risk Insurance Facility (SEADRIF). “Forward-looking risk management tools, like scenario analysis, bring together planning for emerging risks and closing insurance protection gaps, which are both critical for future sustainability.”

“Resilience is a shared responsibility that requires cross-border cooperation and a long-term commitment from insurance supervisors. Commissioner Ricardo Lara’s leadership and sustained commitment have been instrumental in making climate resilience and catastrophe risk key priorities on our shared agenda” said Guillermo Plate, President of the Association of Insurance Supervisors of Latin America and Superintendent of Insurance of Argentina. “Forward-looking strategies for long-term solvency can help build more resilient insurance markets and better protect our communities against future risks.”

“Insurance risks do not stop at national borders, which makes collaboration among regulators more important than ever,” said Steven Rothstein, Managing Director, Ceres Accelerator. “Commissioner Lara has been a strong partner on creating climate risk strategies and turning international lessons into action in California. His regulation shows how forward-looking, accountable planning can strengthen future insurance supervision, better protect policyholders, and lead to more sustainable economies.”

“The combined impacts of advances in risk assessment technology and damaging weather events associated with climate change are profoundly altering the property insurance ecosystem,” said Amy Bach, Executive Director of United Policyholders. “Effectively coordinating with other regulators and stakeholders with a forward looking eye to ensuring that insurance safety nets will continue to be in place for people and businesses impacted by disasters will be part of Commissioner Lara's legacy of leadership in a fast-evolving commercial environment. We commend him and his administration for advancing this important regulation.”

“We are in an era of rapidly changing risks, from the rising impacts of weather-related extremes as the planet warms to the breakneck pace of technological change,” said Carolyn Kousky, Executive Director and Founder, Insurance For Good. “Improving our risk management and investing in reducing risk, however, takes time and insurers should not begin this work only after losses have been devastating. By asking insurers to plan for 2030, 2040 and 2050, California is pushing the industry to prepare for the risks that are coming, not just the ones we’ve already seen.”

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Media notes:

• Link to final text of regulation
• Link to final statement of reasons

Q&A:

What does insurance company solvency mean for Californians?

Solvency means an insurance company has enough money set aside to pay the claims it owes, both today and years from now. When a family loses a home in a wildfire, a driver has a serious accident, or a business suffers a covered loss, they are counting on their insurance company to be financially prepared to pay covered claims, quickly and fully.

The Department’s existing oversight already includes regular financial reviews and examinations of insurance companies operating in California’s admitted market. The new regulation adds a longer view, so Department of Insurance experts can also evaluate how companies are preparing for risks already underway and how those risks or a confluence of those risks could affect their ability to pay claims in the years ahead.

Does this change existing insurance policies or rates?
No. The regulation does not change existing insurance policies, their coverage, or the rates consumers pay, and consumers do not need to take any action. It requires covered insurance companies to give the Department more information about how they are planning for future risks. That helps the Department oversee their financial health and helps make sure they can pay claims for years to come.

Which insurance companies does the regulation apply to?
The regulation applies to “California-domiciled” insurers, meaning insurance companies headquartered in California, with enhanced requirements for insurers that write more than $50 million in direct annual premiums nationwide.

Why does California need long-term solvency planning now?

The growth of artificial intelligence is one of the clearest examples of why regulators need to look forward. As insurance companies adopt new technologies and increasingly complex data and models, regulators also must understand how the risks that can come with rapid technological change could affect insurance companies and the people and businesses relying on them.

Climate change provides a real-world example of why long-term financial planning matters. After the 2018 Camp Fire devastated the Town of Paradise, the volume of claims contributed to the insolvency of one California insurance company. This showed how a catastrophic event can put enormous financial pressure on an insurance company at the very moment policyholders are counting on it most.

The regulation takes a wider view, requiring long-term planning that considers cybersecurity threats, emerging technologies, changing economic and financial conditions, and other risks and opportunities that could affect an insurance company’s financial strength over time.

Why does the regulation look ahead to 2030, 2040, and 2050?

The longer view is important because many of the risks reshaping insurance do not develop overnight. Their financial impact can evolve and compound over years or even decades. By looking beyond the immediate future, the Department can better assess how insurance companies are identifying those changes, considering their potential financial impacts and preparing to remain financially resilient as conditions evolve.

For consumers, that means California’s financial oversight will not be focused only on whether an insurance company is financially sound today. It will also look at how companies are preparing for the risks of tomorrow, strengthening the Department’s ability to address potential financial concerns before they can grow into larger problems for policyholders or the insurance market.

When do insurance companies have to start reporting?
The regulation takes effect October 26, 2026. Covered insurance companies must assemble and make available their first long-term solvency plans to the Department's examiners by January 1, 2028.