California announces plan for insurance policies in high wildfire-risk areas

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If you’re one of thousands of Californians who lost their home insurance coverage due to wildfire risk, this development may apply to you.

On Wednesday, the California Department of Insurance released further details of a plan to increase the writing of homeowners and commercial insurance policies in areas of the state with high wildfire risk.

“Californians in every corner of our state are frustrated with outdated regulations and desperate for change. Whether you live in the Sierra or the foothills, along the coast or in a city, California is not a 'one-size-fits-all' place, and we need to be inclusive. We are enacting a major reform that will result in insurance companies writing 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 (Palomar Mt)
  • Pauma valley, California
  • Armona, California
  • Ranchita, California
  • Santa Ysabel, California
  • Valley Center, California
  • Warner Springs, California

With this map, insurance companies will have direct knowledge of 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 writing policies for a certain number of homes in regions of the state considered at greater risk of wildfires.

In return, the companies would be allowed to use "catastrophe modeling" to predict future losses when asking to raise rates.

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

The commission is holding a public workshop on June 26. After that workshop, the department will review public input before issuing 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.

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