Empowering Futures, Securing Dreams


California’s Insurance Strategy 2024: A Resilient Future Unveiled

In a significant move to address the dwindling insurance options for consumers in California, the state has introduced a groundbreaking insurance strategy. Dubbed “California's Sustainable Insurance Strategy,” these reforms, discussed by Insurance Commissioner Ricardo Lara in a press release on September 21, 2023, are set to be the largest insurance overhaul in the state in 35 years. Governor Gavin Newsom has also issued an executive order to support Lara's efforts, emphasizing the gravity of the situation.

Key Goals of California's Sustainable Insurance Strategy:

  1. Transition from FAIR Plans to Normal Insurance Market: The strategy aims to transition consumers from Fair Access to Insurance Requirements (FAIR) plans back to the regular insurance market. This is a crucial step in providing consumers with more diverse and comprehensive insurance options.
  2. Priority for FAIR Plan Consumers Following “Safer From Wildfires” Legislation: Consumers on FAIR plans who adhere to California's “Safer From Wildfires” legislation will be given priority when switching back to the normal insurance market. This prioritization acknowledges the challenges faced by residents in wildfire-prone areas.
  3. Insurer Commitment to High Wildfire-Risk Communities: Insurers are urged to commit to writing no less than 85% of their statewide market share in high wildfire-risk communities. This ensures a more equitable distribution of insurance coverage, especially in distressed areas.
  4. Adoption of Climate Catastrophe Models: The strategy seeks to expedite the adoption of new rules within the California Department of Insurance, incorporating climate catastrophe models that account for wildfire safety and mitigation actions. This forward-looking approach aims to enhance the industry's preparedness for climate-related risks.
  5. Changes to FAIR Plans for Increased Data Reporting: To prevent bankruptcy in the event of a catastrophic event, changes will be implemented to state FAIR plans, emphasizing increased data reporting. This measure enhances transparency and stability in the face of unforeseen challenges.
  6. Expansion of FAIR Plan Commercial Coverage: FAIR plan commercial coverage will be expanded to $20 million per building, aligning with the state's housing goals. This increased coverage is particularly crucial in the aftermath of significant events.
  7. Improvement in Rate Filing Timeliness and Intervenor Reform: The strategy includes improvements in rate filing timeliness and intervenor reform to increase process transparency. These changes aim to streamline processes and make the insurance landscape more accessible for consumers.

The Urgency Behind the Strategy:

The announcement of these reforms comes after the legislative session ended without a solution to the property insurance crisis. Despite urgent appeals from industry and housing groups, including the California Apartment Association, no action was taken. This legislative inaction is alarming, given the potential insolvency of the FAIR Plan and its detrimental impact on the state's economy.

In California, the country's largest insurance market, the increasing risks associated with wildfires have prompted some insurers to cease issuing or renewing certain policies. This, coupled with the legislative stalemate, has created an urgent need for comprehensive reforms to stabilize the insurance market.

What to Expect During Renewal:

For those facing insurance renewals, preparation is key. Gathering current policies and being ready to answer detailed questions about your property is crucial. This includes information on the year built, square footage, number of buildings and units, updates to electrical, roofing, plumbing, heating, type of electrical panels, notable safety measures, pictures of the building with the address, and a five-year claims history/loss runs.

Quote preparations are also expected to take longer than usual, with a recommendation to start the renewal process 60-90 days before the effective date. Insurers are now emphasizing the need to ensure payment of all loss claims and related expenses while maintaining profitability, given the increased risks in certain areas.

Challenges in the Insurance Landscape:

The situation is further complicated by California's rules regarding insurance rate increases. Any insurer seeking to increase rates over a certain percentage must go through a public hearing with an intervenor to determine the necessity of the increase. This process, criticized for being a hurdle to adapting swiftly to higher claims costs, may take years, potentially leading to delays in addressing critical financial needs.

In instances where insurers are unable to meet increased claims in a timely manner, they may choose to withdraw from certain areas altogether. When insurers exit, consumers are left with no choice but to turn to state-backed FAIR plans, often considered “insurance of last resort.” These plans, while providing coverage, can be significantly more expensive than standard policies.

The Vision for Change:

The proposed plan from the California Department of Insurance aims to rectify the current market conditions that have forced insurers to withdraw from certain parts of the state. Stakeholders are optimistic that these initiatives will provide a balanced approach, benefiting both consumers and insurers, even as climate-related risks continue to pose challenges.

As California takes bold steps towards sustainable insurance, the hope is that these reforms will not only stabilize the market but also pave the way for a more resilient and adaptive insurance industry. With the growing impact of climate change, such proactive measures are essential to safeguarding the interests of both insurers and consumers in the face of evolving risks.


California's Sustainable Insurance Strategy marks a turning point in the state's efforts to address the complexities of the insurance market, particularly in the wake of increasing wildfire risks. As the reforms unfold, it is anticipated that they will create a more robust and responsive insurance landscape, ensuring the availability of coverage for residents while maintaining the financial viability of insurers. The collaborative approach between government authorities, insurers, and other stakeholders sets the stage for a more sustainable and secure future in the face of dynamic challenges.


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