California Department of Insurance outlines rules, catastrophe modeling and outreach to stabilize wildfire insurance market

The California Department of Insurance told the Carlsbad City Council legislative subcommittee on Jan. 14 that it has submitted a package of regulations intended to stabilize homeowners insurance markets in high-wildfire areas, increase insurer participation, and improve consumer resources.

Sharon Smith, outreach analyst in the department's Community Relations and Outreach Branch, described the "sustainable insurance strategy" the commissioner announced in September 2023 and the regulatory steps now under review. She said regulators are allowing use of forward-looking catastrophe models in rate-making, permitting insurers to include California-only reinsurance costs in filings, and requiring insurer commitments to write in identified distressed zip codes before insurers may use those new models.

The department framed the changes as a response to growing catastrophic losses, rising rebuilding costs and constrained reinsurance markets. "Insurance companies are not public utilities, they are not non profits, they are not required to provide coverage to residents and businesses," Smith said, arguing the regulatory changes aim to get private insurers back into the market so fewer Californians rely on the FAIR Plan.

Smith said the FAIR Plan, intended as a gap-filling option, has become a longstanding primary option for many homeowners in high-fire areas and is more expensive while providing narrower coverage. She…