The California Department of Insurance (CDI) has announced the completion of a review of three wildfire catastrophe models. These models will be instrumental in setting insurance rates and guiding coverage availability as companies plan their expansions within the state.
According to the CDI, California’s Sustainable Insurance Strategy mandates that insurers using department-reviewed wildfire catastrophe models must provide and maintain coverage in areas prone to wildfires. This initiative aims to assist policyholders in transitioning out of the FAIR Plan while expanding consumer options statewide. The department is currently accepting rate applications from insurers outlining plans to increase homeowners and commercial insurance in the voluntary market. Mercury Insurance, Allstate, and CSAA were among the first to respond, with additional filings anticipated from other insurers.
The strategy is distinctive to California, requiring insurers to commit to issuing more policies in higher-risk areas. The department completed a six-month public review of models from Verisk, Karen Clark and Company, and Moody’s. These models integrate scientific data on wildfire mitigation efforts by homeowners, communities, and government agencies, potentially reducing insurance costs. Since January 2025, the department has addressed complaints related to Los Angeles wildfires, returning over $67 million to survivors while maintaining model review timelines.
Heather Ozur, president of the California Association of REALTORS, said: “Commissioner Lara’s reforms are a much-needed step forward for California homeowners and communities. Modern catastrophe modeling gives insurers better tools to access wildfire risk. This action is a key part of advancing the Commissioner’s Sustainable Insurance Strategy, which we strongly support. Combined with expanded FAIR Plan coverage, these reforms will help restore choice, affordability, and access to insurance across the state.”
Established in 1868, the CDI regulates California’s insurance industry with an emphasis on consumer protection. Led by Insurance Commissioner Ricardo Lara, it oversees insurer solvency, licenses agents and brokers, monitors market practices, resolves consumer complaints, and investigates insurance fraud. With nearly 1,400 employees supervising over 1,600 insurance companies and more than 495,000 licensed professionals annually handling hundreds of financial reviews and thousands of complaints while recovering over $130 million for consumers. Proposition 103 expanded CDI’s authority in 1988 by making the Insurance Commissioner an elected position requiring prior approval for certain insurance rates.
