California’s insurance market is facing a severe and growing crisis, with wildfires being one of the main culprits. Of California’s 20 most destructive wildfires, 13 have occurred since 2017, causing massive losses for the insurance industry. The losses from the 2017 and 2018 wildfires alone wiped out twice the profits earned from the previous 26 years of underwriting.

The problem is compounded by the uncertainty surrounding underwriting for wildfire risk and getting those rates approved by the insurance commissioner. Construction costs have skyrocketed. State regulations and laws also prohibit including climate change risk or re-insurance costs in insurance rates, making it even harder for insurers to plan for the future.

The result is that insurers are not competing for business in California. The FAIR plan, the insurer of last resort, has seen its insured value skyrocket from $50 billion in 2018 to over $240 billion in 2022. This situation is unsustainable and needs to be addressed urgently.

It is crucial to balance affordable rates for consumers and profitable underwriting for insurers, considering the risk of wildfires and other natural disasters. California needs to bringĀ  stakeholders together to design a functioning, competitive market.