One idea dominated the 2026 race for California Insurance Commissioner: a public, nonprofit insurer for disasters. Jane Kim, who won the race, proposed a public insurer that would provide basic catastrophe coverage and, in years without major fires, invest premiums in wildfire mitigation. Her opponent, State Senator Ben Allen, called the idea unrealistic and argued that existing rules already limit insurer profits.
Whatever your view, the proposal is likely to shape California insurance debates in 2027. This explainer covers how a public disaster insurer could work, what similar programs already exist, the main arguments for and against, and what it would take to make it real. It is not an endorsement of any position.
The problem it aims to solve
Many Californians in wildfire-prone areas have lost standard coverage or seen large price increases. The California FAIR Plan, the insurer of last resort, has grown rapidly and approved a 29.1 percent average dwelling increase for renewals from October 15, 2026. Private insurers say they need rates that reflect catastrophe risk and reinsurance costs; the Sustainable Insurance Strategy now allows that in exchange for writing more policies in distressed areas. Supporters of a public insurer argue that catastrophe risk is too large and correlated to leave to the private market alone.
How a public disaster insurer could work
Details would come from legislation, but proposals of this type usually share a few features:
Catastrophe-only coverage. The public entity covers specific perils, such as wildfire or other declared disasters, while private insurers continue to sell homeowners policies for everyday risks like theft, water damage and liability.
Broad participation. Spreading the risk across many households, not only high-risk ones, lowers the average cost and stabilizes the pool.
Risk-based pricing with mitigation credits. Prices would likely reflect risk, with discounts for home hardening and community programs.
Investment in prevention. In quiet years, a nonprofit structure could direct surplus funds to fuel reduction, home hardening grants and other mitigation.
Reinsurance and capital markets. Like any insurer, it would need reinsurance, catastrophe bonds or other funding to pay claims after a very large event.
Existing models
California Earthquake Authority (CEA)
Created after the 1994 Northridge earthquake, the CEA is a publicly managed, privately funded entity that sells residential earthquake policies through participating insurers. It shows that California can run a catastrophe-only program, though take-up for earthquake insurance remains relatively low, partly because of price and deductibles.
California FAIR Plan
The FAIR Plan is an industry-funded pool created by law to provide basic fire coverage when the private market will not. It is not a nonprofit public insurer in the sense Kim describes, but it shows the challenges of concentrating high-risk properties in one pool.
National Flood Insurance Program
The federal NFIP provides most residential flood coverage in the United States. It has helped make flood coverage available, but it has also carried significant debt after major hurricanes, a cautionary example of what can happen when premiums do not match risk.
Other states
States such as Florida operate insurers of last resort for wind and property risk. Their experiences show both the value of a backstop and the political pressure that builds when such entities grow large.
Arguments in favor
Could restore availability in areas private insurers avoid.
A large, statewide pool may lower costs by spreading risk.
A nonprofit could prioritize mitigation, reducing long-term losses.
Could pair with an expanded public auto option as part of a broader consumer agenda.
Arguments against
Startup capital and reinsurance would be expensive, and taxpayers could face exposure after a catastrophic year.
Underpricing risk could encourage building in dangerous areas.
Private insurers might reduce participation further if a public entity competes with them.
Creating a new insurer requires legislation, governance, staff and years of setup.
A household view
To see how a two-layer system might feel in practice, imagine a family in a foothill community whose standard insurer left the area. Today they carry a FAIR Plan fire policy plus a difference-in-conditions policy for theft, water damage and liability. Under a catastrophe-only public insurer, the family might instead buy one standard homeowners policy from a private carrier for everyday risks, with the wildfire layer provided by the public entity, perhaps billed together. If the public program offered meaningful credits for a Class A roof and a cleared five-foot zone, the family would have a direct financial reason to finish those projects. If the program instead charged everyone similar prices regardless of mitigation, the family might pay less in the short run, but the incentive to reduce risk would weaken. That trade-off between affordability today and lower losses tomorrow is at the heart of the design debate. It is also why many experts say any public option should be paired with strong building standards, land-use planning and funding for community fuel reduction, not just a new place to buy a policy.
Ready to compare prices? Get a free Home quote from Barua Insurance, or request a Earthquake quote in a few minutes.
What it would take
The Insurance Commissioner cannot create a new public insurer alone. It would likely require a bill passed by the Legislature and signed by the Governor, and possibly a funding source approved through the budget or by voters. Questions lawmakers would need to answer include:
Which perils would be covered, and at what limits?
Would participation be voluntary or built into every homeowners policy?
How would prices be set, and how would Prop 103 apply?
Who would fund the startup capital and backstop large losses?
How would it coordinate with the FAIR Plan and private carriers?
What it means for you today
Nothing changes immediately. Your current coverage, prices and options remain the same while proposals are debated. The best steps today are practical:
Shop your home coverage before renewal and request a comparison quote.
Harden your home and document the work.
Review your contents limit in light of the SB 495 disaster payment rule.
Protect against liability with adequate limits and an umbrella policy if appropriate.
Renters should keep renters insurance; landlords should review their landlord coverage.
How to follow the debate
Watch for bills in the 2027 legislative session, hearings in the Assembly and Senate insurance committees, and announcements from the Department of Insurance after the new Commissioner takes office in January 2027. Nonpartisan outlets such as CalMatters and the Legislative Analyst's Office often publish clear analyses of major proposals. When a bill is introduced, its legislative analysis will spell out costs, risks and who supports or opposes it.
Frequently asked questions
Would a public insurer replace my homeowners policy?
Under most proposals of this type, no. It would cover catastrophe perils, while private policies cover other risks. Details would depend on the law.
Would it be cheaper?
Possibly for some households, but it depends on design, risk pricing and funding. No price estimates exist until a specific plan is written.
Is this the same as the FAIR Plan?
No. The FAIR Plan is an industry-funded insurer of last resort. The proposal describes a new nonprofit public entity with a broader mission.
When could it start?
Not soon. Legislation, funding and setup would likely take years.
Does it affect auto or business insurance?
The disaster insurer concept focuses on property catastrophe risk. A separate idea, expanding the low-cost auto program, would affect drivers. Business owners should continue to review their commercial coverage.
This article explains a policy proposal and is not an endorsement. Details may change.
Get a free quote for any Barua service
Auto insurance · SR-22 filing · Non-owner auto insurance · Classic & collector car insurance · Motorcycle insurance · RV & motorhome insurance · Travel trailer & camper insurance · ATV & off-road insurance · Golf cart insurance · Boat & yacht insurance · Jet ski insurance · Mexico auto insurance · Rideshare insurance · Home insurance · Renters insurance · Condo insurance · Landlord & rental property insurance · Earthquake insurance · Commercial insurance · General liability insurance · Commercial auto insurance · Liquor liability insurance · Workers' compensation insurance · Professional liability / E&O insurance · Umbrella insurance · Vehicle title bond · Surety bond · DMV services