California's Department of Insurance, under the leadership of Commissioner Ricardo Lara, is actively implementing measures to enhance the availability of home insurance, especially in areas prone to wildfires. These initiatives are part of a broader strategy to stabilize the insurance market and ensure homeowners have access to necessary coverage.
Enforcement of Catastrophe Modeling Regulation
In December 2024, Commissioner Lara enforced a pioneering regulation that mandates the use of catastrophe modeling in insurance ratemaking. This regulation requires insurance companies to expand coverage in wildfire-prone regions, aiming to provide homeowners and businesses with greater access to insurance options. By incorporating advanced modeling techniques, insurers can more accurately assess risks and set premiums, promoting market stability and recognizing efforts in wildfire mitigation.
Net Cost of Reinsurance in Ratemaking Regulation
Furthering his Sustainable Insurance Strategy, Commissioner Lara introduced the Net Cost of Reinsurance in Ratemaking Regulation. This landmark measure obliges insurers to increase their coverage in high-risk areas, ensuring more options for Californians while limiting costs passed on to consumers. The regulation works in tandem with other reforms to restore stability to California’s insurance market amid growing climate risks.
Mandated Coverage Expansion in High-Risk Areas
To address the insurance crisis in high-fire-risk zones, the Department of Insurance unveiled a plan compelling insurers to resume writing policies in these areas. Insurers are required to increase their coverage by 5% every two years until they reach 85% of their market share. This approach considers the state's diverse geography and accommodates the varying capacities of insurers to assume risk.
Consumer Protections and Moratoriums
In response to recent wildfires, Commissioner Lara extended moratoriums preventing insurers from canceling or nonrenewing home insurance policies in affected areas. These moratoriums offer temporary relief and stability to homeowners, ensuring they maintain necessary coverage during recovery periods.
Through these comprehensive efforts, the California Department of Insurance aims to create a more resilient and accessible insurance market, providing homeowners with the protection they need against the increasing threats posed by wildfires and other climate-related risks.