California Insurance Regulations Update

December 13, 2024

Insurance Commissioner announces enforcement of regulation to expand insurance coverage across state

SACRAMENTO, Calif. —Insurance Commissioner Ricardo Lara enforced his “first of its kind” catastrophe modeling and ratemaking regulation, a central part of his Sustainable Insurance Strategy to increase coverage in wildfire-distressed areas of the state. The Department of Insurance posted the final regulation after the Office of Administrative Law filed it with the Secretary of State, officially concluding a rulemaking process that saw strong public support over the past year.

Here are specific actions taken by the regulation:

• Expanded coverage in wildfire areas: 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.
• Incorporation of wildfire mitigation efforts: The regulation requires catastrophe models to account for mitigation efforts by homeowners, businesses, and communities, something not currently possible under existing outdated regulations today.
• Ensuring the integrity of models: As part of implementing the new regulation, Commissioner Lara announced the hiring of Kara Voss as model advisor — a newly created position at the Department — to oversee the process of examining model integrity and ensuring public review in accordance with the newly established regulation. Under the regulation, once a model has undergone a pre-application required information determination (PRID), insurance companies can utilize that model in a rate filing listing their commitments to write more policies. The Department will accept PRID petitions starting January 2, 2025 and expects the process to be complete within months.
• Supporting a public model: The regulation supports the development of a public catastrophe model, currently being considered by a strategy group of researchers and education leaders led by Cal Poly Humboldt. Recommendations on how to create a public catastrophe model are due from the strategy group to Commissioner Lara by April 2025.

For more information on this announcement, visit the California Department of Insurance website.

Previous CDI communications about Insurance/ Insurance bill/ State Farm’s California Coverage Changes:
CDI Invitation to Workshop (November, 2024)
Mandatory Moratorium on Cancellations and Non-Renewals of Policies (November, 2024)
CDI Invitation to Workshop (March, 2024)
CDI Workshop Draft (March, 2024)
CDI Consumer Alert (March, 2024)
AB-2996 introduced by Assembly Member Alvarez
State Farm Pulls Out of California