SACRAMENTO, California – Gov. Gavin Newsom on Tuesday acknowledged California’s growing wildfire insurance problem after lawmakers failed this week to reach a deal to shore up the market.
He called the retreat of home insurers amid rising costs from climate disasters a “waving red flag” and compared California to Florida, where Gov. Ron DeSantis is also grappling with insurers leaving the state in the wake of costly weather events.
“This is not unique to us,” Newsom told POLITICO in an interview at the California Museum in Sacramento. He cited DeSantis and the sky-high insurance premiums paid by Floridians, as well as Colorado Gov. Jared Polis’ efforts to create a property insurer of last resort. “This is the coming attraction in terms of climate impacts.”
Newsom said administration officials have been meeting regularly on the issue, but didn’t commit to a special legislative session or executive action.
Lawmakers failed to agree on a bill in time for the end of the state’s legislative session on Thursday, with talks collapsing largely over a clash between industry and consumer advocates.
Newsom said the negotiations “unfortunately” fell short.
“I say unfortunately because time is of the essence,” he added.
State leaders acknowledged the growing frustration of residents struggling with insurance earlier on Tuesday: State Farm, Allstate and Farmers announced withdrawals this spring, citing inflation as well as the increased risk of costly wildfires.
The insurer of last resort has also warned it may need a bailout because of all the risk it is now taking on. Newsom said he has a home on the plan, called the FAIR Plan, and said he was “intimately” familiar with the problem.
Assembly Speaker Robert Rivas (D-Hollister), who has been working to pass a bill, said Tuesday that the Assembly will hold a series of public hearings this fall focused on access to coverage, wildfires and disasters.
“We are hearing loud and clear from our residents that access to insurance is a problem,” Rivas said in a statement. “Our mission has always been to ensure that homeowners and businesses across California can access and maintain comprehensive coverage.”
California’s insurance commissioner, Ricardo Lara, has broad authority to issue new regulations, but on Tuesday he stopped short of committing to immediate reform. He has said he wants to allow insurers to use predictive modelling that could raise rates in exchange for a guarantee they’ll stay in the state, but also stopped short of committing to any major reform on Tuesday. In a statement, he said the insurance department would change rules to streamline the department’s rate review process – a longstanding request of the insurance industry, which has complained about delays in state approval of rate increases.
