On March 1 and March 7, the California Senate and Assembly conducted separate Informational hearings on the state of the insurance market in California. PIFC had the opportunity to testify on behalf of the insurance industry at both hearings. Other speakers included residents from high fire risk areas that have been impacted by the insurance crisis, homeowners association presidents, and insurance agents and brokers. The informational hearings were meant to give a high-level update on the current state of California’s insurance market, including ongoing availability and affordability challenges. They also discussed opportunities to improve consumer access and ensure long-term market stability in the event of future disaster-related disruptions.
Common themes during both hearings were the role of the California FAIR Plan, non-renewals in high fire risk areas, wildfire risk modeling, reinsurance, and the modernization of Proposition 103. PIFC spoke at the hearings and discussed the need for the FAIR Plan to serve as the insurer of last resort and that expanding FAIR Plan coverages and limits is not a viable solution to address the growing insurance availability crisis in fire-threat areas of the state. The solution is to change the outdated CDI rules that are causing traditional insurers to restrict their business in California. Specifically, the California homeowners’ insurance market has fallen into a capacity crisis due to a restricted ability to price wildfire risk and significant uncertainty regarding the approval of rate filings. As a result, many carriers who wish to serve California are instead reducing new business capacity and non-renewing wildfire-exposed properties because they cannot receive appropriate returns.
PIFC’s comments were well received, and committee members agreed that conversations around modernizing Proposition 103 should continue.