Wednesday, November 29, 2023

California Rural County Representatives (RCRC) Report State Issues Strategy to Address California’s Property Insurance Crisis

September 30, 2023 – The Rural County Representatives of California (RCRC) reported that 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 stop writing new state policies. 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 across the state.

The Strategy, hailed by the Commissioner’s office as the “biggest insurance reform since Proposition 103,” is poised to become a multi-part regulatory plan designed to modernize California’s insurance market by depopulating the California Fair Access to Insurance Requirements (FAIR) Plan and improve how rates are established for insurance providers. The Strategy contains several components 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 home and business owners from the FAIR Plan back to the normal insurance market with commitments from insurance companies to cover all parts of California through write no less than 85% of their market share statewide in fire-risk communities. For example, if a company writes 20 out of 100 homes across the state, it must write 17 out of 100 homes in a problem area;  
  • Provide a FAIR Plan to policyholders who comply with the new Safer from Wildfires regulation as the first priority for the transition to a normal market, thus enhancing the state’s overall efforts in wildfire safety;  
  • Accelerating the Department’s introduction of new rules for reviewing climate disaster models that identify the benefits of fire 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 achieve the state’s housing goals and providing the necessary coverage to other major state businesses;  
  • Conduct public meetings exploring the inclusion of California-only reinsurance costs in rate filings;  
  • Improve rate filing procedures and timelines by implementing a requirement for insurance companies to submit a complete rate filing, hiring more Department staff to review those rate application and notification of regulatory changes, and intervenor reform to increase transparency and public participation in the process;  
  • Increased reporting of FAIR Plan data to the Department, Legislature, and Governor to monitor progress toward reduction of its holders; and,  
  • Order changes to the FAIR Plan to prevent it from going bankrupt in the case of an extraordinary catastrophic event, including the establishment of its reserves and financial safeguards.  
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The Commissioner and the Department of Insurance hope to complete the regulatory package by December 2024, following a thorough public review process. The RCRC formed a 7-member Ad Hoc Committee to review 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.

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