For decades, California home insurance rates were set mostly by looking backward at past losses. That approach struggled as wildfire seasons grew larger and more expensive. In 2023, the California Department of Insurance announced the Sustainable Insurance Strategy, a set of regulatory changes meant to bring insurers back to the market, especially in wildfire-prone communities. Most of the pieces are now in place, and they shape the homeowners quotes Californians see today.
This article explains the strategy in plain language: what changed, what insurers must promise in return, and what it means if you are shopping for homeowners insurance or trying to leave the FAIR Plan.
The problem the strategy tries to solve
Large insurers paused or limited new homeowners policies in California in 2023 and 2024, and many existing customers received nonrenewal notices. Insurers said California's rules did not let them price future wildfire risk or the cost of reinsurance, the insurance that insurance companies buy. Consumer advocates countered that insurers wanted higher rates without guarantees of more coverage. The Sustainable Insurance Strategy is the Department's attempt to trade one for the other.
Meanwhile, policyholders moved in large numbers to the California FAIR Plan, the insurer of last resort. That concentrated risk in the FAIR Plan and left many homeowners with narrower coverage.
Key change 1: wildfire catastrophe models
A catastrophe model is computer software that simulates thousands of possible wildfire seasons using data on vegetation, weather, terrain, building materials and community mitigation. Instead of relying only on the last 20 years of losses, insurers can use these models to estimate expected future losses.
Under the new rules, models must go through a Department review before insurers use them in California rates. Verisk became the first modeler to complete that review in July 2025, and other modelers have followed. Importantly, the regulations require models to recognize mitigation. That links the strategy to the state's Safer from Wildfires discount program, so a hardened home in a hardened neighborhood should be rated differently from an unprepared one.
Key change 2: the net cost of reinsurance
Insurers buy reinsurance to protect themselves from very large losses. Previously, California did not allow insurers to pass the cost of reinsurance through to policyholders in the same way many other states do. The strategy now allows insurers to include the net cost of California-specific reinsurance in their rate filings, again subject to conditions.
What insurers must give back: the 85 percent commitment
Insurers that choose to use catastrophe models or reinsurance costs in rates must commit to writing more policies in wildfire-distressed areas. The Department's summary describes the requirement as writing at least 85 percent of the company's statewide market share in those areas, or increasing writings there by 5 percent, depending on the situation. If an insurer does not use the new tools, the commitment does not apply.
The idea is simple: higher, more accurate rates in exchange for more availability. Whether it works will show up over the next few years in how many homeowners can leave the FAIR Plan and find standard-market coverage again.
FAIR Plan reforms and a path back
The strategy also includes changes to the FAIR Plan itself, including steps to strengthen its finances and a clearinghouse concept to help move policyholders back into the regular market when insurers are willing to take them. If you are on the FAIR Plan, ask your agent every renewal whether a standard carrier has started writing in your ZIP code again. An independent agency can check multiple carriers at once and give you a side-by-side quote.
A simple example
Imagine two similar houses on the same hillside road. The first has an older wood-shake roof, open eaves and dense shrubs against the walls. The second has a Class A roof, ember-resistant vents, enclosed eaves, and a five-foot ember-resistant zone around the foundation, and the street is part of a recognized community wildfire program. Under the old backward-looking approach, both homes might have been priced almost the same, or both might have been declined. Under a reviewed catastrophe model that recognizes mitigation, the second home should show meaningfully lower expected losses. That difference can mean a better price, a higher chance of acceptance by a standard carrier, or both.
Ready to compare prices? Get a free Home quote from Barua Insurance, or request a Earthquake quote in a few minutes.
For business owners with property in brush areas, the same principles apply to commercial property coverage. Building materials, clearance and maintenance records all help an underwriter. If you own rental units, document upgrades for your landlord policy as well.
What it means for your premium
For many homeowners, especially in high-risk areas, the honest answer is that prices are likely to be higher than they were under the old system, because models and reinsurance costs reflect real risk. The trade-off is that coverage may become available where it was not. For some homeowners in lower-risk areas, model-based pricing may be neutral or even favorable.
Three things are likely to influence your price more than before:
Your home's construction and upkeep. Roof class, vents, siding and defensible space now matter in the model, not just in a discount line.
Your community. Neighborhood-level programs, such as Firewise USA communities, can lower modeled risk for everyone.
Your coverage choices. Deductibles, dwelling limits and endorsements still matter. Review them with an agent rather than cutting coverage blindly.
The politics behind it
The strategy was adopted under Commissioner Ricardo Lara through regulation, not by a new statute, which means a future Commissioner can revisit how it is applied through the same formal rulemaking process. Commissioner-elect Jane Kim has proposed broader ideas, including a public disaster insurer. Consumer groups and insurers will continue to debate whether the strategy delivers the promised availability. Rate filings still go through the Prop 103 prior-approval process, including public intervention.
What it does not change
The strategy focuses on residential and commercial property. It does not change your auto insurance rating rules, the state's minimum liability requirements, or separate products like earthquake insurance. It also does not guarantee that any particular home will be accepted by a particular insurer.
Steps to take now
Complete and document mitigation work: roof, vents, gutters, and five feet of ember-resistant space around the house.
Ask your insurer which mitigation credits are applied to your policy and request a review if something is missing.
If you are on the FAIR Plan, request a standard-market check before every renewal.
Consider bundling home and auto with carriers that are writing in your area.
Talk with neighbors about community programs that may lower risk for the whole street.
Frequently asked questions
Is the Sustainable Insurance Strategy a law?
No. It is a package of Department of Insurance regulations and administrative actions, built on existing law.
Do all insurers have to follow the 85 percent rule?
Only insurers that choose to use wildfire catastrophe models or reinsurance costs in their California rates.
Will catastrophe models lower my premium?
It depends on your risk and mitigation. Models can reward hardened homes, but many high-risk homes will see higher prices.
How do I know if insurers are back in my area?
Ask an independent agent to check the market. Availability changes by carrier and ZIP code.
Does the strategy affect renters?
Indirectly. Renters insurance is generally less affected by wildfire modeling than dwelling coverage, but building owners' costs can influence rents.
This is general information, not legal advice.
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