California announces plan for insurance policies in high wildlife risk areas

If you are one of the thousands of Californians who have lost their homeowners insurance coverage due to wildfire risk, this development may apply to you.

The California Department of Insurance on Wednesday released more details on a plan to increase the underwriting of home and business insurance policies in areas of the state with a high risk of wildfires.

“Californians across our state are frustrated with outdated regulations and desperately need change. Whether you live in the Sierra or the foothills, along the coast or in a city, California is not a single place and we need to be inclusive. We are implementing a major reform that will cause insurance companies to write more policies,” said Commissioner Ricardo Lara.

As part of the announcement, the department released a new statewide map it developed, showing areas where wildfire risk policies are concentrated.

There are 19 areas in San Diego County on the map, including:

Alpine, California
Boulevard, California
Campo, California
Descanso, California
Dulzura, California
Guatay, California
Jamul, California
Julian, California
Pine Valley, California
Potrero, California
Julian, California
Pala, California
San Diego County, California (Mount Palomar)
Pauma Valley, California
Armona, California
Ranchita, California
Santa Ysabel, California
Valley Center, California
Warner Springs, California

With this map, insurance companies will know directly where they need to write more policies in the state in order to take advantage of certain financial incentives.

The department took a hybrid approach due to the state’s large population and complex geography.

Under the plan (click here https://www.insurance.ca.gov/0400-news/0100-press-releases/2024/release023-2024.cfm), companies would commit to drafting policies for a a number of homes in areas of the state considered to be at greater risk of wildfires.

In exchange, companies would be allowed to use “catastrophe modeling” to predict future losses when they request a rate increase.

According to the National Association of Insurance Commissioners, catastrophe models are used to quantify the financial impact of wildfires, using computer models that project the risks of future losses, a concern due to massive wildfires caused by drought and climate change. Currently, historical claims data is used to prepare rate increase requests.

The commission is hosting a public workshop on June 26. After this workshop, the department will review public comments before publishing the full regulations for adoption by the end of the year.

The agency hopes to have the regulations in place by the first of the year.