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AB 376 amendment creates insurer sandbox, flex‑rating and captive options to address wildfire coverage; fiscal note removed
Summary
AB 376 would create a limited 'sandbox' for insurers to test new homeowners products, allow flex rating for homeowners insurance (with thresholds set by the commissioner), permit wildfire‑only or wildfire‑excluded policies, and enable associations to form regulated captives. Division of Insurance and sponsors said an amendment removes the fiscal
Assemblymember P.K. O'Neil presented AB 376, a bill aimed at increasing homeowners‑insurance availability in wildfire‑prone areas. The bill, and a negotiated amendment presented in committee, create several mechanisms intended to expand market options:
- Sandbox innovation program: A time-limited pilot authorizing insurers to propose innovative homeowners products and to request limited waivers of particular statutes or regulations under division oversight. The amendment explicitly preserves core consumer protections and prevents waiver of unfair‑trade and solvency statutes. - Flex rating for homeowners insurance: The amendment would allow the commissioner to set annual thresholds distinguishing an overall rate impact from an individual‑policy rate disruption; insurers could seek approval to use flex rating within the pilot framework subject to public hearing and the commissioner’s determination. - Wildfire‑only or wildfire‑excluded policies: The amendment allows insurers to offer a policy that excludes wildfire coverage or a policy that only covers wildfire, analogous to existing earthquake‑only options; insurers must comply with regulatory solvency standards. - Captives and commercial‑habitational coverage clarifications: The bill would clarify reciprocal insurer requirements, allow homeowner associations and commercial‑habitational entities to form captives, and permit unit owners to separately insure individual units where relevant.
Division of Insurance staff said the amendment removes the division’s fiscal note and that consumer protections in chapters governing examinations and unfair practices cannot be waived under the program. Industry groups including the American Property Casualty Insurance Association and State Farm supported the amended language in Ways and Means; a long‑time insurance broker testified neutral and cautioned realistic expectations. Committee members asked for follow‑up on consumer protections and how the division will review applications; the division said insurers must specify any waiver requests in applications and that there will be no blanket waivers.
Why it matters: The bill seeks to expand insurance options for homeowners in high‑risk wildfire areas by permitting experimental products, tailored wildfire contracts, shared risk vehicles and flexible rating under close regulatory oversight.
Discussion vs. decision: The committee held a hearing, considered the amendment that removed the division’s fiscal note and closed the hearing; no committee vote was recorded. Division staff committed to providing details on application review and public‑hearing procedures on request.
Ending: Sponsors and the division emphasized the pilot nature of the program and a statutory sunset to allow legislative review of outcomes.
