Department of Insurance expanding coverage for Californians who need it most

Review of wildfire catastrophe models paves way for insurers to close coverage gaps statewide for homes and businesses

The California Department of Insurance continued the momentum toward improving insurance options statewide. The Department announced it had completed the review of three forward-looking wildfire catastrophe models, which will help stabilize insurance rates and increase access to coverage. Companies are already announcing they will expand in the state, helping to ease the insurance availability crisis caused by growing wildfires. 

What it means: Expanding coverage for Californians in wildfire-distressed areas

Under Commissioner Lara’s Sustainable Insurance Strategy, insurers utilizing Department-reviewed wildfire catastrophe models will be mandated to provide and maintain coverage in wildfire-prone areas. This will also assist policyholders in transitioning out of the FAIR Plan and restore consumer options statewide. The Department will begin accepting rate applications from insurers detailing their plans to write and maintain more homeowners and commercial insurance policies in the voluntary market. Mercury Insurance, Allstate, and CSAA were the first to respond that they plan to make filings – with more expected from other insurers.

“Only in California” requirement to write more policies: Wildfire catastrophe models have existed for more than 20 years, and every other U.S. state allows insurance companies to set their rates using this modeling. But California is the only state where insurance companies will commit to writing more policies in higher risk areas under the Strategy.

Thorough review with public input: The Department’s Model Advisor led an extensive and thorough six-month process to vet the integrity of wildfire catastrophe models that was open to public participation. The Department’s regulation provides a focused, transparent, and efficient way for insurance companies to utilize a model in a rate filing. The Department has completed its review of models from Verisk, Karen Clark and Company, and Moody’s – making all three of these models available for use by all insurance companies. View more information at the Department’s website.

Stable and sustainable insurance rates: Unlike public utilities, which are legally obligated to provide service, insurance companies have not been required to offer coverage under Proposition 103. For over 30 years, insurers have increased rates — often with the agreement of intervenors like Consumer Watchdog — without any obligation to remain in the market. Consequently, many insurers raised prices, withdrew from California, and left consumers with limited choices and soaring premiums.

Incentivizing wildfire safety to drive down insurance costs: Under the previous system of historical data, insurance consumers face rate spikes after major wildfires, with no recognition of the billions of dollars spent on wildfire mitigation. Wildfire catastrophe models will reflect the best available scientific data on mitigation efforts for the first time by homeowners, businesses, local communities, state and federal governments, and utility companies – helping drive down the cost of insurance. The Sustainable Insurance Strategy also builds on Commissioner Lara’s Safer from Wildfires regulation that introduced the nation’s first mandatory wildfire insurance safety discounts in 2022.

Staying on time and on track despite Los Angeles wildfires: Commissioner Lara opened the model review on January 2, 2025, which was days before the devastating Los Angeles wildfires. The Department has remained on time and on track while aggressively investigating consumer complaints from the Los Angeles wildfires, resulting in more than $67 million returned to wildfire survivors to date since January.

In statements and social media over the past week, groups representing consumers praised the Commissioner’s progress on implementing reforms:

“Commissioner Lara’s reforms are a much-needed step forward for California homeowners and communities. Modern catastrophe modeling gives insurers better tools to access wildfire risk. This action is a key part of advancing the Commissioner’s Sustainable Insurance Strategy, which we strongly support. Combined with expanded FAIR Plan coverage, these reforms will help restore choice, affordability, and access to insurance across the state.” – Heather Ozur, President of the CALIFORNIA ASSOCIATION OF REALTORS

“California Farm Bureau commends Insurance Commissioner Ricardo Lara for taking decisive action to stabilize California’s insurance market. The state’s insurance crisis poses unique challenges for farmers and ranchers. Without access to insurance, farmers may be unable to invest in the property, infrastructure and equipment they need to grow our food. California Farm Bureau supports the framework established by the California Department of Insurance providing insurers the tools they need to assess current risks and set rates accordingly in exchange for expanding access to coverage. The approval of a catastrophe model for insurance companies in an important step. We look forward to working with the Department of Insurance to ensure agricultural operations and rural communities have access to the coverage they need.” – Shannon Douglass, President of the California Farm Bureau Federation

“One of the groups hit hardest are the independent mom-and-pop rental property owners. Changes take time but if market forces work the way they’re supposed to, more insurers writing policies in CA and balancing supply and demand should lead to more competitive rates.” – Adam Pearce, President of the California Rental Housing Association

“Commissioner Lara’s reforms are a critical step toward restoring a stable and functional insurance market in California. The new catastrophe modeling regulations create a needed, climate-informed regulatory structure that helps insurers and reinsurers better assess wildfire risk and responsibly return to high-need areas. This opens the door for more companies to reenter the market, which is key to bringing back choice and affordability for consumers. For the building industry, it means more opportunities to insure projects and deliver the housing Californians urgently need. Combined with the FAIR Plan’s expanded commercial coverage, these actions support the long-term health of our housing supply, our economy, and the communities we serve.” – Dan Dunmoyer, President and CEO of the California Building Industry Association

“An insurance market that cannot set rates based on the realities of climate change is a market that is not sustainable. This is in part why it is so difficult and expensive for growers and wineries to get coverage. With catastrophe modeling, it is hoped that insurers would be better able to assess future risks and would again offer coverage in the wine country areas that they have left behind.” – Michael Miiller, Director of Government Relations for the California Association of Winegrape Growers

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