Even Low-Risk Homes Are Caught Up in California’s Climate Insurance Crisis

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Another bill, backed by California Insurance Commissioner Ricardo Lara, would allow the FAIR plan to offer comprehensive coverage. The plan, which now writes nearly 10% of residential policies in the state, currently can only provide fire insurance and homeowners must buy policies elsewhere to cover other damage. Experts say moving homeowners off FAIR and back to private insurers is key to restoring a healthy market but the legislation could make the plan a more attractive alternative than traditional insurance.

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“The FAIR Plan was never designed to be as good as the protection that you can get in the private market because we don’t want people on FAIR,” said Amy Bach, executive director of United Policyholders, a San Francisco nonprofit that advocates for homeowners.

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Michael Soller, a deputy California insurance commissioner, said the aim of the legislation is to provide homeowners the coverage they need when “they have to be on the FAIR Plan, but that needs to be short term.”

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A FAIR spokesperson said the plan is reviewing the bill but had no comment.

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Sektnan said the growth of last-resort insurance in California, including in lower-fire-risk areas, is due in part to its relatively low premiums. “You can’t depopulate the FAIR Plan if it’s competitively priced or if it’s priced lower than what’s in the market,” he said.

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There are tentative signs, though, that access to the private market is improving. After breakneck growth in the FAIR Plan since 2024, enrollment increased by less than 4% in the final three months of last year. The California Department of Insurance has recently approved or is currently considering rate increase requests from six major insurers under its “sustainable insurance strategy” that promises quicker reviews of proposals in exchange for commitments to expand coverage in high-risk areas.

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“Insurance companies are coming into the department detailing their plans to actually stay and what we’re seeing are initial signals of market turnaround and growth,” said Soller.

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For instance, the state’s second-largest insurer by market share, Farmers Insurance Group, has asked for a nearly 7% rate hike. To secure that increase, it has pledged to market to 300,000 consumers living in high-risk wildfire zones beginning in 2026 and to add about 5,600 policies in those areas over two years, according to an insurance filing. The fifth-largest insurer, CSAA Insurance Group, noted in its 2025 rate request that it has issued 18,300 more policies in high-fire-hazard areas than the state requires. 

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No. 3 insurer Mercury General Corp. set a target to add 15% more policies in high-risk areas over the next two years in its filing for a rate increase last year. The company said that its eight-year goal is to shift 6.5% of FAIR Plan policyholders to its own policies.

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Insurance industry representative Sektnan said the market won’t recover without even faster reviews of rate hike petitions as otherwise inflation erodes the value of premium increases. 

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Testifying before a state legislative committee in February, Lara told lawmakers the insurance department has completed recent rate hike assessments in 120 days and now is targeting a 60-day review. “We are not out of the woods,” he said. “A structurally healthier market is a 3–5-year project.”

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