When Cali­for­nia’s insur­ance mar­ket deteri­or­ated into a state of crisis, Insur­ance Com­mis­sioner Ricardo Lara sought to solve it with a bar­gain: He would give insur­ance com­pan­ies long-desired reforms that would make it easier to raise rates so long as they prom­ised to write more policies in high wild­firer­isk parts of the state.

But the pre­cise terms of this deal, coined the Sus­tain­able Insur­ance Strategy, were unclear: How much exactly would rates rise, and how many policies would com­pan­ies real­ist­ic­ally write in the areas they had just been flee­ing?

To date, six private insurers have filed to raise rates under these new reforms. The group does not include All­state Insur­ance or State Farm Gen­eral, the two major insurers who have not writ­ten any new policies in sev­eral years.

These six insurers, which col­lect­ively cover roughly a third of all insured res­id­ences in Cali­for­nia, each sought to raise rates by about 6.9%, far less than the double-digit increases sev­eral have pur­sued over the past few years. Together, they have com­mit­ted to writ­ing about 13,250 new policies — only about 2% of the res­id­ences cur­rently on the Cali­for­nia FAIR Plan, the state’s insurer of last resort.

It’s a tent­at­ive sign that Cali­for­nia’s insur­ance mar­ket may be start­ing to climb out of its crisis, des­pite the dev­ast­at­ing Los Angeles County wild­fires last year — though another test may soon loom as signs point to an early and poten­tially pro­longed wild­fire sea­son this year.

The Sus­tain­able Insur­ance Strategy made two major changes to the way insur­ance com­pan­ies price their policies. Rather than using his­tor­ical data about wild­fire losses to estim­ate future risk, the reforms allowed com­pan­ies to instead set their prices based on for­ward-look­ing wild­fire cata­strophe mod­els. They’re also now allowed, for the first time, to charge poli­cy­hold­ers for part of what they pay for rein­sur­ance — insur­ance that insurers them­selves buy in case a fire or other cata­strophe

becomes too large for the com­pany to handle on its own.

In order to use these two reforms, com­pan­ies had to prom­ise to insure homes in parts of the state the Depart­ment of Insur­ance des­ig­nated as “dis­tressed” — com­munit­ies where wild­fire risk is high and so are FAIR Plan num­bers. (The entire county of Marin, for example, is con­sidered “dis­tressed.”) Spe­cific­ally, com­pan­ies would need to ensure that their mar­ket share in these dis­tressed areas was at least 85% of its over­all statewide mar­ket share.

So, a com­pany that insured 100 out of every 1,000 homes in Cali­for­nia would need to insure at least 85 out of every 1,000 homes in these spe­cific dis­tressed areas. However, under the reg­u­la­tions, there was a second option — a com­pany could write 5% more policies in dis­tressed areas.

Reg­u­lat­ors’ goal was to get insurers to reduce the num­ber of poli­cy­hold­ers who have turned to the FAIR Plan, a state-cre­ated but privately-run insurer that only cov­ers fire and often costs much more than a policy from the private mar­ket.

Half of the insurers who have filed for rate changes under the Sus­tain­able Insur­ance Strategy were required to write new policies. These three com­pan­ies — Mer­cury Insur­ance, Farm­ers Insur­ance Group and Pacific Spe­cialty Insur­ance Co. — all chose the 5% option, a total of just 8,111 new policies on paper.

Mer­cury wrote in its fil­ing that it is plan­ning to go bey­ond the 5% by intern­ally tar­get­ing a 15% increase in its dis­tressed area mar­ket share, or about 6,242 new policies rather than the required 2,107.

For Mer­cury to meet the full 85% threshold, the com­pany would have had to write more than 28,600 new policies within the reg­u­la­tion’s two year require­ment, accord­ing to its fil­ing. Vic­tor Joseph, the insurer’s chief oper­at­ing officer, said the min­imum 5% option allowed the com­pany to pur­sue more con­ser­vat­ive but sus­tain­able growth, rather than pur­sue rapid expan­sion that could have strained its abil­ity to pay poten­tial claims.

Both Farm­ers and Pacific Spe­cialty also indic­ated that they con­sidered 5% to be a min­imum rather than the goal. After sub­mit­ting its fil­ing, Farm­ers said it would lift its more than 2year-old cap on the num­ber of homeown­ers policies it writes per month. In a state­ment, a spokes­per­son told the Chron­icle its agents had already begun reach­ing out to homeown­ers in dis­tressed areas to offer new policies. Pacific Spe­cialty did not respond to a request for com­ment on its plans.

If an insurer apply­ing for change rates had already met its required num­ber of policies in dis­tressed areas, the reg­u­la­tions do not require them to write any addi­tional policies. That’s the case for the other three insurers who were recently approved to hike rates — USAA, San

Mateo-based Cali­for­nia Cas­u­alty Indem­nity Exchange, and CSAA, the AAA-affil­i­ated insurer for North­ern and Cent­ral Cali­for­nia.

Karen Collins, vice pres­id­ent of prop­erty and envir­on­mental for the Amer­ican Prop­erty Cas­u­alty Insur­ance Asso­ci­ation, an industry group, said the Sus­tain­able Insur­ance Strategy was designed to recog­nize that some com­pan­ies already insure a sig­ni­fic­ant num­ber of homes in wild­fire-prone areas.

“There are some com­pan­ies that did not fully pull back,” Collins said. “What their com­mit­ment is going to look like may not be the same as other com­pan­ies that maybe did have to pull back for vari­ous reas­ons.”

CSAA and Cali­for­nia Cas­u­alty have never stopped writ­ing new policies in Cali­for­nia, accord­ing to the com­pan­ies. Two USAA sub­si­di­ar­ies have a morator­ium on new policies, but the other two do not; all four insure a greater share of homes in dis­tressed areas than they do in the state over­all. A com­pany spokes­per­son told the Chron­icle that USAA remains optim­istic about the Cali­for­nia insur­ance mar­ket, but did not offer spe­cific details about when these sub­si­di­ar­ies might reopen.

Though not required under the reforms, CSAA said it would offer new policies to about 1,000 poli­cy­hold­ers who cur­rently get fire cov­er­age from the FAIR Plan but have a sec­ond­ary policy with CSAA to cover everything else, known as a dif­fer­ence in

con­di­tions policy. Laurna Castillo, CSAA’s senior vice pres­id­ent of west­ern state product, said this decision came from con­ver­sa­tions with the Depart­ment of Insur­ance on how to sup­port the Sus­tain­able Insur­ance Strategy and a com­pet­it­ive insur­ance mar­ket.

Even with this extra effort, these first few fil­ings under the Sus­tain­able Insur­ance Strategy do not come close to com­bat­ing the hun­dreds of thou­sands of Cali­for­nia homeown­ers who have lost insur­ance over the past sev­eral years and been forced to the FAIR Plan — a fact that the depart­ment acknow­ledges.

“The num­bers we’re see­ing are ini­tial signs of mar­ket growth. Obvi­ously, we know much more is going to be needed to reduce the FAIR Plan’s growth and turn that around,” said Deputy Insur­ance Com­mis­sioner Michael Soller.

Over the next two years, reg­u­lat­ors will be mon­it­or­ing whether com­pan­ies ful­fill their com­mit­ments and where exactly they’re writ­ing policies.

There are still more than 90 home insurers, respons­ible for the other 70% of policies in Cali­for­nia, who have yet to make any fil­ings — though the state’s biggest player, State Farm Gen­eral, will not be jump­ing in any time soon. Earlier this month, State Farm agreed to a set­tle­ment over a 2-year-old rate request, filed before the Sus­tain­able Insur­ance Strategy was final­ized. As part of that set­tle­ment, which allowed it to cement a 17% rate increase for homeown­ers, it agreed to not file for any addi­tional rate changes that would take effect before 2027, accord­ing to a com­pany spokes­per­son.

“At the rate levels agreed to in the set­tle­ment, it will take time for State Farm Gen­eral to rebuild the fin­an­cial capa­city to reopen to new busi­ness,” the spokes­per­son wrote. State Farm has not offered new home insur­ance policies in the state since 2023.

Cali­for­nia’s other major insurer that no longer writes new homeown­ers policies, All­state, has also not yet filed for a rate change under the Sus­tain­able Insur­ance Strategy.

In 2024, as the reg­u­la­tions were being work­shopped, an All­state exec­ut­ive told reg­u­lat­ors, “If the reg­u­la­tions were in effect today, we would begin selling new homeowner insur­ance policies tomor­row.” A com­pany spokes­per­son did not respond to a request for com­ment.

Jamie Court, pres­id­ent of the advocacy group Con­sumer Watch­dog, views the reforms as a fail­ure.

Since Septem­ber 2023, when Lara first announced the Sus­tain­able Insur­ance Strategy, the num­ber of res­id­ences insured by the FAIR Plan has more than doubled from just under 320,600 to nearly 646,900 as of the end of 2025.

“Given the size of increases in the FAIR Plan, it’s noth­ing. It’s a neg­at­ive num­ber,” said Court, whose group has been crit­ical of the reforms since they were first intro­duced. “The com­mis­sioner put this out as the sal­va­tion for the mar­ket, and it clearly isn’t.”

Even if policies become more avail­able, that doesn’t mean they’ll be afford­able, he added.

To these cri­tiques, Soller and his boss, Lara, point out that insur­ance com­pan­ies have always raised rates in Cali­for­nia. The 6.9% increases are not a coin­cid­ence — at 7% or above, Cali­for­nia reg­u­la­tions allow for greater pub­lic over­sight which can lengthen the approval pro­cess.

But for the first time, these rate hikes will be expli­citly tied to the prom­ise of writ­ing new policies or main­tain­ing their cur­rent pres­ence, Soller said.

“Insur­ance com­pan­ies are now fil­ing know­ing that that is the require­ment,” Lara told the Assembly Insur­ance Com­mit­tee last month. “They’re recom­mit­ting to Cali­for­nia, which is dif­fer­ent.”

Rep­res­ent­at­ives for Farm­ers, Mer­cury and CSAA each said their com­pan­ies have expan­ded the level of dis­counts cus­tom­ers can qual­ify for by bund­ling policies or per­form­ing work to reduce their prop­er­ties’ wild­fire risk in order to off­set increased rates.

Lara told legis­lat­ors he pre­dicted some relief within the first one to two years of the reforms, with full mar­ket sta­bil­iz­a­tion in three to five years — pro­gress that will be meas­ured by sus­tained decline in FAIR Plan policies, Soller said.

Amy Bach, exec­ut­ive dir­ector of the con­sumer advocacy group United Poli­cy­hold­ers, said she’s begun to see signs of the Sus­tain­able Insur­ance Strategy improv­ing the mar­ket. Both CSAA and Farm­ers said their agents have already begun reach­ing out to homeown­ers to offer new policies. Mean­while, no new com­pan­ies have announced mass non­re­new­als or placed new restric­tions recently, even after the Eaton and Pal­is­ades wild­fires in Los Angeles broke the record for the cost­li­est wild­fire event in his­tory, Soller noted.

But Bach said there are some issues these reg­u­la­tions don’t touch, like the rapid flow of homeown­ers being pushed into another type of insurer, known as a non-admit­ted or sur­plus lines insurer. These com­pan­ies’ prices and policies are not reg­u­lated the way tra­di­tional insurers are, often leav­ing homeown­ers with exor­bit­ant premi­ums and cov­er­age car­ve­outs. In 2023, the latest avail­able data from the Depart­ment of Insur­ance, these insurers rep­res­en­ted a record 0.4% of the mar­ket, double what it had been five years prior.

Before the Assembly com­mit­tee, Lara, who is termed out of his pos­i­tion early next year, named a num­ber of legis­lat­ive reforms he’d like to see build upon the Sus­tain­able Insur­ance Strategy — grant pro­grams for home harden­ing, increas­ing policy lim­its dur­ing dis­asters, expand­ing the cov­er­age offered by the FAIR Plan and more. Some of these enjoy wide sup­port from both con­sumer advoc­ates and the industry, oth­ers are more con­tro­ver­sial.

“Every decision we make and the bills we’re look­ing at as a whole can … either shorten the timeline or lengthen it,” Lara test­i­fied. “It all depends.”