The goal is to ensure that homeowners and business owners will find necessary coverage
California Insurance Commissioner Ricardo Lara recently announced that a new draft measure would make it a requirement for property insurance companies using new catastrophe modeling to write more policies in areas at a higher risk of events such as wildfires.
Larger insurers must insure properties at a specific minimum level
The draft regulation would require that all companies using new catastrophe modeling to write more property insurance policies in distressed areas. That said, larger insurers would have to write those policies in distressed areas at a minimum rate of 85 percent of the market share across the state for that company.
This is a component of Lara’s broader Sustainable Insurance Strategy, which is a package of reforms created for the marketplace in California in order to strengthen it and maintain a solid level of consumer protection.
The property insurance crisis in California isn’t anything new
“This is another critical action to help fix California’s decades-old insurance crisis. It will help homeowners who face higher threats of wildfire get the coverage they need, while also easing pressure off of the state’s FAIR Plan,” said California Governor Gavin Newsom. “As the climate crisis has rapidly intensified, the insurance system hasn’t been seriously reformed in 30 years – this is part of our strategy to strengthen our marketplace and get folks the coverage they need.”
In 2023, Newsom called for rapid regulatory action to help the state to escape its property insurance crisis and stabilize the market in the state. The focus was on improving the rate approval process, accelerating regulation implementation, and creating a stronger FAIR Plan.
Boosting speed and transparency for rate changes
In May 2024, the Newsom Administration issued its own proposal for raising the speed and transparency associated with approval timelines for rate change applications. At the same time, it was also meant to help keep up Proposition 103 consistency for consumer protections against inadequate, excessive, or unfairly discriminatory insurance rates.
Property insurance rates have been rapidly rising across the country due to the climate crisis, but California is among the states feeling it the most acutely due to the wildfires that have been growing in frequency and severity.
