Newsom bends over and takes it up the ass from insurance companies

New rules in California mean a 50% policy increase because Democrats 
failed to do their jobs.

Commissioner Lara issues landmark regulation to expand insurance access 
for Californians amid growing climate risks
Measure is final major step in historic reform to expand insurance 
coverage across California

SACRAMENTO, Calif. — Insurance Commissioner Ricardo Lara today announced 
the final major step in his Sustainable Insurance Strategy, issuing a 
historic regulation aimed at restoring stability to California’s insurance 
market while addressing the growing risks of wildfires and climate change. 
The new Net Cost of Reinsurance in Ratemaking Regulation requires 
insurance companies — for the first time — to increase coverage in high-
risk areas, ensuring more options for Californians while limiting the 
costs passed on to consumers. The regulation works hand-in-hand with other 
reforms that Commissioner Lara has spearheaded that will have the effect 
of increasing insurance coverage options for Californians across the 
state.

“Californians deserve a reliable insurance market that doesn’t retreat 
from communities most vulnerable to wildfires and climate change,” said 
Commissioner Lara. “This is a historic moment for California. My 
Sustainable Insurance Strategy is focused on addressing the challenges we 
face today and building a resilient insurance market for the future. With 
input from thousands of residents throughout California, this reform 
balances protecting consumers with the need to strengthen our market 
against climate risks.”

Reinsurance is a financial tool that is part of how insurance companies 
manage their risk portfolios associated with the policies they write to 
homeowners and business owners. Its roots date back to the 14th century, 
when merchants and traders sought ways to spread the risks of perilous 
ocean voyages, often relying on multiple insurers to cover their ventures. 
Today, as climate risks escalate across the nation, reinsurance has become 
an even more imperative component of insurance companies operating in 
high-risk and distressed areas, including California. Modernizing 
regulations around reinsurance will enable insurance companies to expand 
coverage and write more policies in communities across the state facing 
greater risk, ensuring stability and resilience in our insurance market.

All other states except California allow for costs of reinsurance in rates 
and, in 2023, the first systematic review of climate risk strategies by 
Ceres and the California Department of Insurance revealed that reinsurance 
is the primary strategy most insurance companies use to continue to write 
and expand coverage in higher risk parts of California and across the 
country.

What it means: Insurance companies must increase coverage in wildfire-
prone regions, ensuring they write policies for at least 85% of their 
statewide market share, with annual increases until the threshold is met.

More coverage for Californians in wildfire-distressed areas: All 
homeowners insurance companies must increase the writing of comprehensive 
policies in wildfire distressed areas equivalent to no less than 85% of 
their statewide market share, whereas there is no current legal 
requirement today for insurers to provide any coverage in high-risk areas. 
Companies will have to continue to increase by 5% every two years until 
they meet this threshold. 

Cost caps: The regulation treats reinsurance like other insurance company 
expenses allowed under Prop. 103 today — such as claims handling or agent 
commissions — by establishing an industry-wide standard cost of 
reinsurance and capping the amount of reinsurance costs that can be 
charged to consumers. Companies spending more than the industry standard 
cannot pass these costs onto their policyholders. 

Greater efficiency: Establishing a standard cost based on an index of what 
insurance companies spend encourages them to be efficient and compete for 
the best price for reinsurance, so consumers get the best value. 

California-only costs: The regulation limits costs to California-only, so 
consumers do not pay for the cost of Gulf Coast hurricanes or Midwest 
windstorms. 

Reliable rates: The regulation goes hand-in-hand with forward-looking 
wildfire catastrophe models that can better predict future rates. Under 
the current system of historical data, insurance consumers are paying 
balloon premiums and rate spikes after major wildfires, without increased 
availability. 

Prevents “model-shopping”: “Model shopping” describes when insurance 
companies choose one model that produces higher rates for consumers, and 
another that lowers their reinsurance costs. To prevent model shopping, 
the regulation requires insurance companies utilize the same model for 
both. This promotes more consistent approaches to assessing risks, and 
balances the scales for consumers.  

Largest insurance reform in 30 years: The new regulation is the final 
major element of the largest insurance reform in 30 years for California. 
The Department held multiple workshops and hearings in 2024, including a 
meeting on December 5 which was attended by more than 500 people and 
received 70 verbal and written comments which helped shape this 
regulation. Commissioner Lara has met with tens of thousands of 
Californians in all 58 counties across the state since taking office as 
well as testifying at four legislative briefings about his Sustainable 
Insurance Strategy over the past year.

Commissioner Lara announced on December 13 that he had finalized a 
wildfire catastrophe modeling regulation with a requirement for insurers 
to increase their policy offerings in underserved areas of the state as a 
condition of incorporating catastrophe modeling into ratemaking. These two 
regulatory efforts work together, with other Sustainable Insurance 
Strategy reforms, to increase the availability of homeowners and 
commercial insurance policies in wildfire distressed areas.

Led by Insurance Commissioner Ricardo Lara, the California Department of 
Insurance is the consumer protection agency for the nation's largest 
insurance marketplace and safeguards all of the state’s consumers by 
fairly regulating the insurance industry. Under the Commissioner’s 
direction, the Department uses its authority to protect Californians from 
insurance rates that are excessive, inadequate, or unfairly 
discriminatory, oversee insurer solvency to pay claims, set standards for 
agents and broker licensing, perform market conduct reviews of insurance 
companies, resolve consumer complaints, and investigate and prosecute 
insurance fraud. Consumers are urged to call 1-800-927-4357 with any 
questions or contact us at www.insurance.ca.gov via webform or online 
chat. Non-media inquiries should be directed to the Consumer Hotline at 
800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.

https://www.insurance.ca.gov/0400-news/0100-press-
releases/2024/release065-2024.cfm