Commissioner Lara enforces groundbreaking regulation to expand insurance coverage in wildfire-prone areas
Commissioner Lara enforces groundbreaking regulation to expand insurance coverage in wildfire-prone areas
Commissioner Ricardo Lara today announced the enforcement of California’s first catastrophe modeling regulation, a key element of the Department of Insurance’s Sustainable Insurance Strategy.
- The regulation requires major insurance companies to increase coverage in wildfire-prone areas, offering homeowners and businesses greater options and market stability.
- For the first time, catastrophe models must account for wildfire mitigation efforts, ensuring recognition of billions invested in community safety measures like home hardening.
- The Department will begin accepting model applications starting January 2, 2025, with the regulation set to reshape insurance coverage in the coming months.
The regulation has earned strong support from local leaders, consumer advocates, environmental organizations, agricultural representatives, and fire safety experts, all emphasizing its innovative approach to expanding insurance coverage and recognizing wildfire risk mitigation efforts.
What it Means: Major insurance companies must increase the writing of comprehensive policies in wildfire distressed areas equivalent to no less than 85% of their statewide market share, whereas there is no current legal requirement today for insurers to commit to providing any coverage in high-risk areas. Smaller and regional insurance companies must also increase their writing.
Department of Insurance POV: “Giving people more choices to protect themselves is how we will solve California’s insurance crisis. For the first time in history we are requiring insurance companies to expand where people need help the most. With our changing climate we can no longer look to the past. We are being innovative and forward-looking to protect Californians’ access to insurance.” – Commissioner Lara
Background: This regulation is the first of its kind in California and a major step toward fixing outdated insurance practices that left homeowners and businesses in wildfire-prone areas without sufficient coverage. Key changes include:
- Insurance companies must now write policies equivalent to 85% of their statewide market share in wildfire-prone areas.
- For the first time, catastrophe models can reflect risk-reduction measures, helping stabilize rates and expand policy availability.
- This regulation builds on the Department’s “Safer from Wildfires” program, which rewards wildfire safety efforts with discounts.
What’s next: The Department of Insurance is finalizing reinsurance benchmarks for submission to the Office of Administrative Law. Read more: https://www.insurance.ca.gov/0400-news/0100-press-releases/2024/release062-2024.cfm
Led by Insurance Commissioner Ricardo Lara, the California Department of Insurance is the consumer protection agency for the nation's largest insurance marketplace and safeguards all of the state’s consumers by fairly regulating the insurance industry. Under the Commissioner’s direction, the Department uses its authority to protect Californians from insurance rates that are excessive, inadequate, or unfairly discriminatory, oversee insurer solvency to pay claims, set standards for agents and broker licensing, perform market conduct reviews of insurance companies, resolve consumer complaints, and investigate and prosecute insurance fraud. Consumers are urged to call 1-800-927-4357 with any questions or contact us at www.insurance.ca.gov via webform or online chat. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.
