Approved by state legislators in late 2024, the Sustainable Insurance Strategy aims to get homeowners off the state’s expensive and low coverage FAIR Plan for those who otherwise cannot get insurance. Many homeowners have been pushed onto the FAIR Plan as home insurers have left California or not renewed policies as the risk of wildfires and other climate change-fueled catastrophes mount.
More home insurance options are expected statewide by early 2026, after California regulators approve new risk models and process insurers’ requests for rate increases.
“Our goal is for consumers to have more options and more choices for coverage” and for homeowners to be able to “shop around,” said Gabriel Sanchez, a spokesperson for the California Department of Insurance.
But the increase in availability will likely come with sharper rate hikes, said Joel Laucher, a consumer advocate with nonprofit United Policyholders. “The ‘sustainable’ piece is about being able to keep the marketplace open,” he said. “It does not mean affordable.” It’s unclear how sharp the increases could be, he said.
New insurance rules
Large home insurance companies will be required to cover 85% of their state market share in areas at high risk of fire, including all of Santa Cruz County. For example, a company that covers 20% of California homes must insure about 17% of homes in high-risk areas.
Existing state law requires insurers to justify requests to raise premiums. The new rules allow insurers to point to factors previously excluded from those justifications — including the risk of future fires.
The risk is calculated with statistical tools called catastrophe models. They essentially allow insurers to price in the increasing number of large wildfires and other natural disasters fueled by climate change. The models must be scientifically validated and approved by the department.
Insurers will also be able to hike rates to cover the cost of their reinsurance, which is essentially a policy for insurance companies to cover cost overruns.
Reducing fire risks
Measures to reduce fire risk could temper premium hikes. In applications for new rates, companies must consider home hardening and fuel reduction measures that homeowners, neighborhoods, and local and state governments undertake.
Those measures encompass things like homeowners clearing brush, neighborhood Firewise groups to coordinate fire preparedness, and city or county enforcement of fire safety codes.
Larger scale action would be more likely to reduce risk and justify discounts than individual efforts, said Mark Sektnan, a lobbyist for the American Property Casualty Insurance Association.
Even if individual homes are hardened to wildfire, “if your house is less than 20 feet from another house, and the other house goes up in flames” yours likely will as well, Sektnan said. “There’s really nothing you can do about it, which is why community mitigation is so important.”
In February, Gov. Gavin Newsom signed an executive order that directs state agencies to create rules by the end of the year to mandate 5 feet of clear space around homes outside cities and in high-risk neighborhoods.
That could require homeowners to remove trees and bushes, replace bark with concrete or rock, and replace wooden fences with metal ones.
Los Angeles wildfires
The new regulations have been in the works for more than a year, officials said. Recent destructive fires in Southern California did not influence them.
But the blazes sent “another shock wave through the market” that might make insurance companies more wary about writing new policies in California, Laucher said. Although insurers are required to issue 85% of their state market share in specific counties and ZIP codes at high risk of wildfire, there’s no such requirement in much of the state.
“We kind of might be fighting against climate change, essentially,” Laucher said.
The fires overdrew the FAIR Plan, and policyholders across the state are set to foot part of the bill.
The Eaton and Palisades wildfires in January destroyed more than 16,000 homes and other buildings, killed 29 people and forced hundreds of thousands to evacuate, according to Cal Fire.
Insurers have paid a combined $1 billion towards the FAIR Plan overruns, and can pass on part of the cost to policyholders.
Homeowners are likely to see new assessments “in the next several months,” Sanchez said. The assessments will cost a percentage of the premium and can be charged once or over up to two years.
-Jesse Kathan, Santa Cruz Local, March 28 2025
