2021 Dixie Fire Night Operations near Taylorsville on August 25
Credit: USFS
September 30, 2023 - The Rural County Representatives of California (RCRC) reports on September 21, Governor Gavin Newsom issued an Executive Order designed to strengthen California’s property insurance market, as the largest policy providers continue to cease writing new policies in the state. The strategy was accompanied by an announcement from California Insurance Commissioner Ricardo Lara, who introduced the Sustainable Insurance Strategy to improve market conditions for property owners throughout the state.
The Strategy, touted by the Commissioner’s office as the “largest insurance reform since Proposition 103,” is poised to be a multi-part regulatory plan designed to modernize California’s insurance market by depopulating the California Fair Access to Insurance Requirements (FAIR) Plan and improving how rates are established for insurance providers. The Strategy contains many components that were rumored to be part of a last-minute legislative attempt in early September to reform California’s insurance market, including:
-
Executive action by Commissioner Lara to transition homeowners and businesses from the FAIR Plan back into the normal insurance market with commitments from insurance companies to cover all parts of California by writing no less than 85% of their statewide market share in high wildfire risk communities. For example, if a company writes 20 out of 100 homes statewide, it must write 17 out of 100 homes in a distressed area;
-
Giving FAIR Plan policyholders who comply with the new Safer from Wildfires regulation first priority for transition to the normal market, thus enhancing the state’s overall wildfire safety efforts;
-
Expediting the Department’s introduction of new rules for the review of climate catastrophe models that recognize the benefits of wildfire safety and mitigation actions at the state, local, and parcel levels;
-
Directing the FAIR Plan to further expand commercial coverage to $20 million per building to close insurance gaps for homeowners associations and condominium developments to help meet the state’s housing goals and to provide required coverage to other large businesses in the state;
-
Holding public meetings exploring incorporating California-only reinsurance costs into rate filings;
-
Improving rate filing procedures and timelines by enforcing the requirement for insurance companies to submit a complete rate filing, hiring additional Department staff to review rate applications and inform regulatory changes, and enacting intervenor reform to increase transparency and public participation in the process;
-
Increasing data reporting by the FAIR Plan to the Department, Legislature, and Governor to monitor progress toward reducing its policyholders; and,
-
Ordering changes to the FAIR Plan to prevent it from going bankrupt in the case of an extraordinary catastrophic event, including building its reserves and financial safeguards.
The Commissioner and the Department of Insurance expect to have the regulatory package completed by December 2024, after a thorough public review process. RCRC has formed a 7-member Ad Hoc Committee to examine the Strategy and develop policy recommendations to the RCRC Board of Directors by December 2023. For more information, visit the Department of Insurance website. For questions, contact RCRC Senior Policy Advocate, Staci Heaton.
