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Homeowner’s Insurance Crisis


California Commissioner’s 4-Part-Plan

The state’s Commissioner of Insurance has unveiled a comprehensive Four-Part Plan to drive significant reforms in the insurance industry. The plan includes joining the 49 other states that recognize insurers’ reinsurance costs, a move expected to bring stability and efficiency to the sector. Another essential aspect of the plan involves adjusting the rate of return for wildfire risks retained by insurers, rather than ceded to reinsurers, to encourage better risk management practices. Furthermore, the plan allows insurers to leverage catastrophe models in developing state-level rates, embracing advanced technology to enhance accuracy and precision. Additionally, the Commissioner’s Plan requires strict observance of the 180-day deemer provision in Insurance Code Section 1861.05(c) by the Department, eliminating pressure on insurers to waive it. These measures together aim to improve the insurance landscape in the state, ensuring fair practices, consumer protection, and a more secure environment for insurers and policyholders alike.

Cal. Code Regs. Tit. 10, § 2644.5 – Catastrophe Adjustment

In those insurance lines and coverages where catastrophes occur, the catastrophic losses of any one accident year in the recorded period are replaced by a loading based on a multi-year, long-term average of catastrophe claims. The number of years over which the average shall be calculated shall be at least 20 years for homeowners multiple peril fire, and at least 10 years for private passenger auto physical damage. Where the insurer does not have enough years of data, the insurer’s data shall be supplemented by appropriate data. The catastrophe adjustment shall reflect any changes between the insurer’s historical and prospective exposure to catastrophe due to a change in the mix of business. There shall be no catastrophe adjustment for private passenger auto liability.

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