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 said the departmenthas identified preliminary distressed zip codes using a data-driven approach that cross-references income and FAIR Plan concentration and will update the list annually.

Smith described several concrete regulatory and program items:
- Catastrophe modeling: regulators will permit insurers to use private catastrophe models (Verisk and Moody's models are already under review) so rate filings can account for parcel-level mitigation and home-hardening efforts rather than rely solely on historical losses. Insurers must show commitment to write in distressed zip codes before using these models in filings.
- California-only reinsurance costs: insurers may include only reinsurance costs that are California-specific when calculating rates to avoid allocating global catastrophe costs to California policyholders.
- FAIR Plan modernization: temporary comprehensive commercial coverage limits have been increased to address gaps for large HOAs and commercial structures. Smith said the department raised the per-structure commercial coverage cap from a per-location $20,000,000 to a higher cap (the department described an aggregate cap increase to address large commercial needs) and said the program changes include solvency protections and additional public reporting; the expanded limit will remain in place for a defined period (the department cited a three-year horizon for some improvements).
- Process improvements: the department is hiring staff, updating technology to reduce delays in rate reviews under Proposition 103, and adding transparency about interveners (third parties who challenge rate filings) and their legal-fee eligibility.

Smith asked local officials to partner through two outreach efforts: a Community Outreach and Education Partnership program that provides consumer materials and monthly training, and a Local Climate Planning initiative targeted to cities and local governments with webinars beginning Feb. 26, 2025. She also repeated the department hotline for consumer complaints and questions.

Council members pressed for local detail and assistance for residents. Smith said the department does not yet publish city-level catastrophe-risk scores for every jurisdiction but is developing a public catastrophe-model tool with partners including Arizona State University and Humboldt that could provide more granular risk information in the future. She reiterated that the department's outreach specialist for the region can speak at local events and urged residents with denied coverage or cancellation notices to call the department hotline.

The department and councilmembers discussed timing: Smith said the regulations themselves have been submitted and the next step is insurer rate filings and the departmentreview process. She offered a mid-2025 target for insurers to make new policies available, but said the recent wildfire events and related claims could affect that timeline.

The presentation prompted detailed questions about the FAIR Plan, whether FAIR Plan coverage is less costly (Smith: "It's not. It's definitely not less expensive. It's usually more expensive, and it's less coverage"), how long consumers can remain on FAIR Plan (she said there is no statutory time limit), and what immediate practical assistance the department can provide. Smith directed residents with individual policy problems to the department's consumer hotline.

Carlsbad staff thanked the department for the presentation and said the city would share outreach materials with residents and consider participating in the department's local-climate webinars.

Resources mentioned: California Department of Insurance consumer hotline (800 number), the department's FAIR Plan materials and the department's Local Climate Planning guide. The department also announced an insurer-focused public workshop scheduled in Santa Monica on Jan. 18and 19, and monthly outreach sessions for partners.

Ending: The department said most of the regulatory work is complete and implementation now depends on insurers submitting full, model-supported rate filings and on the department's review schedule; councilmembers were advised to direct individual consumer complaints to the department hotline and to consider the departmentlocal-climate tools for long-term mitigation planning.