California would need approximately $36 billion to build a wildfire fund durable enough to last 20 years with a 75% probability of solvency, which is more than double the commitment made in 2025, according to a report submitted to the governor and Legislature by the California Earthquake Authority, which serves as administrator of the wildfire fund.
The report was mandated as part of SB 254, which sought to enhance the financial stability of investor-owned utilities (IOUs) by establishing a segregated account within the state’s Wildfire Fund to manage claims against electric IOUs for wildfires ignited after Sept. 19, 2025. The legislation authorized up to $10 billion in bonds and created approximately $18 billion in capacity, funded through “nonbypassable” ratepayer charges and utility contributions, according to Fitch Ratings.
The report presents a range of options to improve the state’s catastrophe resiliency, warning that the cost of inaction is “high and growing,” with each percentage-point increase in utility financing costs translating to roughly $5 per month in additional charges for residential utility customers.
Wildfire Costs Are Straining Utilities and Ratepayers
Wildfire-related charges now add approximately $41 per month to the average Pacific Gas & Electric residential bill, $27 for Southern California Edison, and $21 for San Diego Gas & Electric, the report said. California’s IOU residential rates — ranging from roughly 35 to 46 cents per kilowatt-hour — are already double to triple the national average of about 16 cents. Annual rate increases from 2016 to 2024 ran at approximately 7% to 11% across the three large utilities, far outpacing inflation of roughly 3.5% over the same period.
The report found these costs fall regressively, with lower-income households devoting two to five times their share of income to wildfire-related charges compared to higher-income households. The rate trajectory also undermines California’s climate goals by weakening the economic case for electrification, according to the CEA.
S&P downgraded Southern California Edison to BBB-minus in September 2025, citing a smaller-than-expected Wildfire Fund to cover liabilities as a primary factor. PG&E’s corporate credit rating remained below investment grade for more than five years following its 2020 bankruptcy emergence, the report noted.
Insurance Market Dysfunction Deepens in High-Risk Areas
California’s property insurance market is “effectively bifurcated,” the report said, with a healthy and competitive market in lower-risk regions but a dysfunctional one in higher-risk areas. The FAIR Plan — designed as an insurer of last resort — now holds approximately $725 billion in total exposure across nearly 670,000 policies. In very high fire risk ZIP codes, the FAIR Plan’s market share reached 43% by 2024, up from 2.8% in 2015.
The January 2025 Los Angeles wildfires exposed the fragility of this arrangement. The FAIR Plan’s $370 million surplus covered less than 10% of its estimated $4.1 billion in losses, triggering a $1 billion emergency assessment on all admitted insurers. A future event generating $5 billion to $10 billion in FAIR Plan losses could produce per-policy assessments of $300 to $630 on admitted-market policyholders statewide, regardless of their wildfire exposure, according to the report’s estimates.
Up to two-thirds of homeowners are inadequately insured for wildfire total-loss events, typically by around 20% and in some cases by as much as 60% relative to actual rebuild costs, the report said, citing data from consumer advocate United Policyholders. Of the five most destructive California wildfires from 2017 to 2020, which burned nearly 22,500 homes, just 38% had been rebuilt as of spring 2025.
Three Pathways Forward — None of Them Cheap
The report organized its recommendations on catastrophe resiliency into three pathways. The first calls for a coordinated statewide commitment to community wildfire risk reduction, noting that targeted mitigation of the highest-risk 10% of communities could reduce more than 20% of statewide aggregate losses. An estimated $19 billion investment to mitigate 70% of at-risk structures could achieve a 47% reduction in wildfire risk, compared to just 35% from an uncoordinated approach.
The second pathway addresses equitable allocation of catastrophe burdens, including options to eliminate inverse condemnation — the strict liability doctrine that makes California the only state holding utilities liable for wildfire property damage regardless of fault — and to end insurer subrogation against utilities, which the report said could reduce total wildfire settlement costs by roughly 35% to 40%.
The third pathway envisions expanded state roles, including a potential state-sponsored wildfire insurer that would require $25 billion in capital and could result in post-event assessments of $1,900 to $2,000 per policyholder following an extreme loss event, the modeling found.