California Insurance Commissioner Ricardo Lara announced a package of sweeping executive actions that include changes to the FAIR Plan, new rules for the review of climate catastrophe models, and public meetings exploring incorporating California-only reinsurance costs into rate filings—changes he says will improve insurance choices and protect Californians from increasing climate threats.

The California Department of Insurance is calling it the largest insurance reform since voters passed Proposition 103 nearly 35 years ago. The latest reforms also call for changes to Prop 103, which include changes to the controversial intervenor process.

California’s Sustainable Insurance Strategy is described as comprehensive approach building a multi-year effort to modernize California’s insurance market.

California Gov. Gavin Newsom also issued an executive order urging prompt regulatory action that supports Lara’s actions for communities affected by climate change.

The actions announced are aimed at addressing problems fueled by climate change, including global inflation and increased costs for rebuilding that have led to several insurance companies pausing coverage for writing new homeowners and commercial insurance policies, according to the CDI.

“We are at a major crossroads on insurance after multiple years of wildfires and storms intensified by the threat of climate change. I am taking immediate action to implement lasting changes that will make Californians safer through a stronger, sustainable insurance market,” Lara said in a statement. “The current system is not working for all Californians, and we must change course. I will continue to partner with all those who want to work toward real solutions.”

Elements of the plan include:

• Executive action by Lara to transition homeowners and businesses from the FAIR Plan back into the normal market with commitments from insurers to cover all parts of California by writing no less than 85 percent of their statewide market share in high wildfire risk communities.
• Giving FAIR Plan policyholders who comply with the new Safer from Wildfires regulation first priority for transition to the normal market.
• Expediting the CDI’s introduction of new rules for the review of climate catastrophe models that recognize the benefits of wildfire safety and mitigation actions.
• 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 meet the state’s housing goals and to provide required coverage to other large businesses in the state;
• Holding public meetings exploring incorporating California-only reinsurance costs into rate filings.
• Improving rate filing procedures and timelines by enforcing the requirement for insurance companies to submit a complete rate filing, hiring additional CDI staff to review rate applications and inform regulatory changes, and enacting intervenor reform to increase transparency and public participation in the process.
• Increasing data reporting by the FAIR Plan to the CDI, Legislature, and governor to monitor progress toward reducing its policyholders.
• Ordering changes to the FAIR Plan to prevent it from going bankrupt in the case of an extraordinary catastrophic event, including building its reserves and financial safeguards.

The following statement by the American Property Casualty Insurance Association issued the following statement in response to the plan:

“We want to thank Governor Newsom for his Executive Order outlining needed reforms to address California’s insurance crisis. We also want to commend Insurance Commissioner Ricardo Lara for his commitment to regulatory reforms. We urgently need to begin enacting reforms to try and repair the insurance market and protect consumer access to coverage.”

Consumer Watchdog, whose founder authored Prop. 103, wrote Newsom to dissuade him from declaring a state of emergency on insurance that would give Lara “the power to raise homeowner rates by waiving the rules that have protected Californians against price gouging for the last thirty-five years.”

“A very small percentage of California’s insurance market—3 percent—has been forced out of the California market into the FAIR plan,” the letter from Consumer Watchdog founder Harvey Rosenfield and President Jamie Court stated. “As you recently acknowledged to Politico, you are among those homeowners unreasonably abandoned by the insurance companies in the private market and forced to buy a policy that is more expensive, with fewer benefits.”