Wildfires and floods have driven insurance premiums higher across California, with home insurance costs up 21 percent and the FAIR Plan—California’s insurer of last resort—now covering nearly 700,000 policies. By June 2026, the FAIR Plan reported 696,562 dwelling and commercial policies in force, marking a 157 percent jump since September 2022. During that period, the plan’s total exposure climbed to $768 billion, up about 250 percent, and written premium reached $2.04 billion, a 212 percent increase. Earlier this month, the FAIR Plan’s rates rose by an average of 29.1 percent after the California Department of Insurance approved the hike for policies issued or renewed on or after October 15, 2026. That 29.1 percent is an average across the portfolio, so some policyholders face higher or lower changes depending on risk and renewal dates. The plan’s share of single-family households has grown from 2 to about 5 percent since September 2022. In high-risk communities like Truckee, Nevada City, Malibu, and Lake Arrowhead, FAIR Plan coverage now approaches half of local homes. In Mendocino County, for example, there were 4,873 home policies as of June 30, 2026, with average annual premiums around $3,363. Statewide, the average FAIR Plan policy costs just over $3,000 per year, compared to a private-market average of about $1,571. Coverage terms differ, though, and FAIR Plan policies are typically narrower, focusing on fire-related risks and requiring extra insurance for broader protection. Stanford research shows average California homeowners-insurance premiums rose 84 percent between late 2020 and March 2026, while average deductibles increased from $1,813 to $2,553. The FAIR Plan now covers about 5 percent of single-family homes statewide and backs roughly 6 percent of new mortgages, highlighting its growing role in the market. SF Times, Mendocino Voice, Hometown Station
Many Californians now struggle to find affordable coverage as major insurers pull back from high-risk areas. The withdrawal of admitted insurers from wildfire-prone regions has pushed more households into the FAIR Plan, which was set up as a fallback for those unable to get private coverage. The January 2025 Palisades and Eaton fires played a major role, raising questions about renewals, rebuilding costs, and whether insurers would keep writing coverage. The January 2025 Los Angeles fires alone caused an estimated $3.5 billion to $4 billion in FAIR Plan losses and led to a $1 billion assessment on participating admitted insurers in February 2025. The residual-market structure spreads FAIR Plan losses among member insurers based on market share. This setup means severe shortfalls can create new obligations for insurers statewide, affecting pricing and underwriting in the broader market.
Competing Visions for Reform
Ben Allen, a state legislator from the Pacific Palisades, is pushing for reforms to make the insurance market work better. His proposals include changing the rate-setting process and expanding grants to help property owners protect against wildfires. He also wants insurers to return to high-risk regions. Allen’s plan would require insurers to disclose fossil fuel investments.
Jane Kim, former San Francisco Supervisor and the top vote getter in the June 2 primary, is calling for a publicly run “single payer” disaster insurance program. Kim’s plan would need legislative approval and would be funded by a levy on insurers, using premium income already paid by Californians. The program would guarantee disaster insurance for all, invest in mitigation, and avoid investing in fossil fuel companies. Kim has called the current market a “hostage situation,” arguing that insurers have managed to profit even as risks grow, with underwriting income rising from $24.3 billion in 2024 to $68.7 billion in 2025 and $111.6 billion earned from investing premium income last year.
Industry Response and Political Stakes
Both candidates have pledged not to take donations from industries affected by the insurance commissioner’s decisions, including insurance companies. Still, political action committees (PACs) have spent millions on the race, with about $3.2 million supporting Allen and $1.5 million opposing Kim, according to CalMatters. The largest pro-Allen PAC, Californians for an Affordable Future, is funded mainly by crypto billionaire Chris Larsen. Other major donors include the California Association of Realtors, the California Business Roundtable, and investor-owned utilities such as PG&E and Edison International. Kim’s main outside support comes from the California Working Families Party and labor unions.
Kim’s platform also includes consumer protections such as blocking insurers from raising rates after a claim and charging interest on delayed payouts. She also wants to address price discrimination in auto insurance and examine what counts as a “reasonable profit” in rate hikes.
Broader Implications
California’s insurance crisis is part of a national trend. Across the United States, home insurance costs have surpassed property taxes in two-thirds of counties, with average premiums up 46 percent since 2021—triple the rate of inflation. As private insurers leave risky markets, public officials have turned to insurers of last resort, which often come with higher costs and limited coverage. The outcome of California’s insurance commissioner race could shape how other states handle the growing challenge of insuring homes and businesses as climate-driven disasters become more common.
California Insurance Commissioner Ricardo Lara has said the goal is to “move people away from the FAIR Plan,” stressing that the residual pool should not replace ordinary coverage. The current challenge is to reduce FAIR Plan reliance by restoring private capacity and mitigation incentives, without leaving high-risk homeowners uninsured during the transition. The FAIR Plan’s rapid growth and the resulting concentration of risk have created a feedback loop: insurer withdrawals increase FAIR Plan enrollment, rising exposure pushes up required premiums and assessments, and higher prices make coverage less affordable. The plan’s growing importance now affects not just consumer pricing but also the solvency and pricing of the broader admitted market, raising questions about the future structure of disaster insurance in California. BC ESG
For more on the political and regulatory context, see previous coverage.
