California Insurance Commissioner Ricardo Lara has announced a new initiative aimed at compelling insurers to resume writing policies in high-fire-risk areas, marking a significant move to address the state’s ongoing insurance challenges. The initiative introduces three distinct pathways through which insurers can meet minimum policy-writing requirements in areas classified as “high risk” or “very high risk” by Cal Fire.
Under the proposal, insurers must choose one of the following options:
1. Write policies in high-risk areas equivalent to 85% of their statewide market share. For example, if a company insures 20 out of every 100 homes statewide, it must cover 17 out of 100 homes in these high-risk zones.
2. Achieve a one-time 5% increase in policies written specifically in high-risk areas.
3. Expand policy coverage by 5% by transitioning homeowners currently insured under the FAIR Plan—the state-mandated insurer of last resort for fire insurance—into private insurance policies.
These requirements can be fulfilled either at the county or ZIP code level, focusing on areas identified as “distressed” or “undermarketed” where the FAIR Plan already provides a significant portion of coverage.
Governor Gavin Newsom applauded the initiative as crucial to addressing California’s insurance crisis amid escalating climate challenges. He emphasized that while the proposals are not mandates, insurers are expected to comply as failure to do so could impact their ability to leverage catastrophe modeling, a capability currently unavailable in California.
Commissioner Lara underscored the importance of accountability, stating that insurers must commit to writing more policies and that his department will enforce compliance rigorously. Insurers will be required to specify their chosen pathway when submitting rate reviews, with potential repercussions for non-compliance, including rate adjustments and refunds.
While stakeholders, including insurance companies and consumer advocacy groups, have voiced varying degrees of support and concern, the proposal remains subject to public feedback and further refinement. Lara’s office plans to continue engaging with stakeholders and refining the initiative, with additional components of the overall plan expected to be unveiled in the coming months.
The California Insurance Department will host a public workshop on June 26 to solicit feedback, with written comments accepted until June 27. This initiative represents a critical step in reshaping California’s insurance landscape to better serve homeowners facing increasing challenges related to fire risk and insurance affordability.
