Wildfire-prone California to consider new rules for property insurance pricing

California will let insurance companies consider climate change when setting their prices, the state’s chief regulator announced Thursday, a move aimed at preventing insurers from fleeing the state over fears of massive losses from wildfires and other natural disasters.

Thank you for reading this post, don't forget to subscribe!

Unlike other states, California does not let insurance companies consider current or future risks when deciding how much to charge for an insurance policy. Instead, they can only consider what’s happened on a property in the past to set the price.

At a time when climate change is making wildfires, floods and windstorms more common, insurers say that restriction makes it difficult to truly price the risk on properties. It’s one reason why, in the past year, seven of the top 12 insurance companies doing business in California have either paused or restricted new business in the state.

On Thursday, California Insurance Commissioner Ricardo Lara said the state will write new rules to let insurers look to the future when setting their rates. But companies will only get to do this if they agree to write more policies for homeowners who live in areas with the most risk — including communities threatened by wildfires.

“Modernizing our insurance market is not going to be easy or happen overnight. We are in really unchartered territory and we must make difficult choices when the world is changing rapidly,” Lara said at a news conference.

The rule change could mean higher rates for homeowners who are already seeing dramatic increases. Eight insurance companies doing business in California have requested rate increases of at least 20% or higher this year, according to the California Department of Insurance.

Harvey Rosenfield, founder of the advocacy group Consumer Watchdog and author of a 1988 ballot proposition that regulates insurance rates, said Lara’s announcement “will dramatically increase homeowner and renter insurance bills by hundreds or even thousands of dollars.”

But Lara said looking to the future to set rates doesn’t have to always be pessimistic. Insurers can also consider the billions of dollars the state has spent to better manage forests and the improvements homeowners have made to their homes to make them resistant to wildfires — all things insurers aren’t allowed to consider when setting rates under the current rules.

“Insurers have advanced a very powerful argument that the past is not as good a predictor of the future as it used to be,” said Amy Bach, executive director of United Policyholders, a national insurance consumer organization. “I think the (Insurance) department did what it needed to do to try to restore a viable market. We don’t have a viable market right now in this state in a lot of areas.”

California isn’t the only state that’s struggled to keep home insurance companies amid natural disasters. Officials in Florida and Louisiana, which deal with hurricanes and flooding, have fought to keep companies writing policies. A recent report from First Street Foundation said about one-quarter of all homes in the nation are underpriced for climate risk in insurance. Florida allows insurers to consider climate risk with restrictions. States with less regulated insurance markets have insurers who build current and future events into their models.

Wildfires have always been part of life in California, where it only rains for a few months out of the year. But as the climate has gotten hotter and dryer, it has made those fires much larger and more intense. Of the top 20 most destructive wildfires in state history, 14 have occurred since 2015, according to the California Department of Forestry and Fire Protection.

Insurance companies have responded by not renewing coverage for many homeowners who live in areas threatened by wildfires. When that happens, homeowners who need insurance must purchase it from the California Fair Access to Insurance Requirements (FAIR) Plan. All insurance companies doing business in California must pay into a fund to provide coverage from the FAIR plan.

People with mortgages often have to buy home insurance because their lender requires it. The number of people on California’s FAIR plan nearly doubled in the five years leading up to 2021, and that number has almost certainly increased even more in the past two years.

Lara said his plan is to require insurance companies to write policies for no less than 85% of their statewide market share in areas at risk for wildfires. That means if a company writes policies for 20 homes, it must write 17 new policies for homeowners in wildfire-distressed areas — moving those people off of the FAIR Plan.

“This is a historic agreement between the department and insurance companies,” Lara said.

The American Property Casualty Insurance Association, which represents insurers, called Lara’s actions “the first steps of many needed to address the deterioration” of the market.

“California’s 35-year-old regulatory system is outdated, cumbersome and fails to reflect the increasing catastrophic losses consumers and businesses are facing from inflation, climate change, extreme weather and more residents living in wildfire prone areas,” Denni Ritter, vice president for state government relations, said in a statement.

Jeremy Porter, a co-author of the First Street Foundation report on climate risk, said allowing insurers to consider climate change in their pricing might lead to more competition in the state’s insurance market.

“If this is implemented correctly, this would definitely allow insurers to come back into the market in California,” he said.

Some consumer groups, including Consumer Watchdog, say they are not opposed to insurance companies using a model to look to the future to set their rates. But they want to see what is in that model. It’s not clear if California’s new rules will allow that. State regulators will spend much of the next year deciding what the rule will be.

Click here to read the full article in AP News


  1. They just gave a BLANK CHECK to the insurance industry, which is profit-driven. Expect the populace to stagger under the weight of huge increases — now all of us who do not live in fire- or flood-prone regions will have to subsidize those who live in the coveted forested areas in the East Bay, Sausalito hills, Sierra foothill areas and tony hillsides of Los Angeles and Santa Barbara–the ones who can afford to pay additional premium to insure their risky homes.

    • My homeowners insurance was cancelled after Farmers Insurance flew a drone over my house and decided my 200 plus year old oak trees were too close to the roof. Now this?

      I live in the mountains in Southern California and we haven’t had a wildfire in over 10 years, The area I live in has never had a wildfire.

      I agree, this IS a money grab and a blank check for the insurance companies, however, it’s not aimed at YOU who live in the suburbs. I wouldn’t live down there. Crime, politics, homeless…it’s disgusting. I don’t know you live there but you keep voting the democrats in. You owe this to yourself.

  2. “Climate change” is nothing new. (How did Greenland get its name?) But inscos should be allowed to price for changes in the political climate which in CA has led to fires and floods from mismanagement of our lands, and a lot of hot air from Sacramento.

  3. Well this all seems rather ineffective. Allowing insurers to consider risk seems like a very good plan, but CA thinks it’s some kind of modern innovation. No wonder the insurers are leaving CA like so many other over regulated business. Soon CA will have to supply all the services the private sector once did. And maybe that’s what CA government wants, total control of everything. Then they can finally achieve their liberal nirvana. But the reality is, forest service and other governments and counties do not clear forests like they used to. We live at Homewood for instance on Lake Tahoe. The trees in our neighborhood are so thick you cannot see the lake from one block away. We trimmed the heck out of our lot and trees, but TRPA disallows any tree cutting larger than 14″ on or near the lake. And the forest service land around us is very dense tree cover. All the housing areas are like this, dense, heavy trees everywhere. The entire South shore almost went to ash last year as a fire raced up HWY 50 from just above Sacramento and swept through 40 miles of CA timber and communities and then up into the NV desert. With a different wind pattern, the whole west shore would be gone now. Advise: 1) Cut the damn trees in residential areas. 2) Remove TRPA anti cut regulations. 3) Make forest service remove 50% of growth and slash burn it now. 4) Allow and require counties to promugate fire safe cutting regulations. Make it easy and necessary for home owners to cut and trim. Then the insurers will came back.

  4. “At a time when climate change is making wildfires, floods and windstorms more common”

    Cannot believe these idols of the Cloward-Priven Strategy are still swilling this garbage.

  5. Meteorologist+ can only accurately predict weather for the next 36 hours but yet claim they are experts for the next 100 years. People need to wake up to the money laundering scam.

  6. There is NO climate change. What is wrong with you people that you buy into that crap?

    Keep voting democrat! They have destroyed this state, the businesses, and now the residents. When the democrats are done, this sh**hole will have nothing but illegals and homeless in it.

    Gavin Newsome is the top realtor in California, thanks to his policies. We need to sue him.

  7. Insurance companies must make a profit to maintain High reserves for pay outs in disasters. It is a BUSINESS decision to leave states that do not provide a level of fire protection that makes their rates commensurate with the risks.
    So long as California environmentalists over ride logical forest management, rural Californians will continue to live in preventable danger. And soon without the ability to rebuild their homes.

    • Insurance companies also have the perk of dropping you, even after decades of you paying them, with zero compensation.
      Nice bit of profit there.

      Environmentalist are not overriding logical forest management.
      The Government pays Environmental Corporations ($$$ Equal Access to Justice $$$) to manage our lands, the way the Government wants to.
      The ‘Environmentalist’ are used as a Government tool so we point the finger at their fall guy.
      Your County Board of Supervisors has the authority and the power to stop most of that.
      Though Coordination (NEPA), Eminent Domain and other avenues.
      Because, guess what?!
      The Feds don’t own any of this land!

  8. In Trinity County State Farm charged you/dropped you because of your Zip Code.

    Also, Trinity County is about 80+% Federally managed land. The Feds burn us, annually, hundreds of thousands of acres at a time. The private property burned because it came off of Federally managed lands.
    Our property is fairly safe from fire. We are NOT safe from the Feds. Which is why people in Trinity know not to evacuate or, “They will burn you out”.
    A few other Counties are beginning to learn this lesson, the hard way.

    This has nothing to do with ‘fire insurance’. Like the Fire Tax, it’s another scheme to force people off their rural properties.
    Even if the Company you’ve given money for years doesn’t drop you…most of us can’t afford their jacked up prices anyway.
    It’s a shame that we aren’t rich enough to buy ‘Government Insurance’ because THAT is what we need protection from.

Speak Your Mind