California Department of Insurance Approves 1st Wildfire Catastrophe Model

The California Department of Insurance (CDI) has approved Verisk’s Wildfire Model. Verisk Extreme Event Solutions President Rob Newbold said insurers can now use the model to assess wildfire risk and set rates for California homeowners and commercial customers.

It is the first model approved under Insurance Commissioner Ricardo Lara’s Sustainable Insurance Strategy. The plan requires insurers to write and maintain coverage in wildfire prone areas.

“This is a transformative moment for the insurance industry and for California homeowners and businesses,” Newbold said. “We’re proud to be the first catastrophe modeler to work with the California Department of Insurance to offer a modeled assessment of wildfire risk and contribute to efforts to bring stability to the insurance market. The latest version of the model, released in 2024, reflects decades of scientific research and engineering expertise, and we believe it will be a powerful tool for insurers navigating the complexities of wildfire risk in a changing climate.”

The CDI is also looking at models submitted by Karen Clark and Company and Moodys.

Under Lara’s plan, insurers have to start writing at least 85% of their marketshare in California in wildfire-distressed areas.

“For the first time in California history, insurance companies will be required to write more policies in wildfire-distressed areas. This closes one of the biggest coverage gaps across the state,” Lara said. “Under existing regulations, insurers have raised rates without guaranteeing coverage or committing to Californians, causing distress for homeowners. That ends now.”

One of biggest critics of how insurance rates are set, and approved, in California is the American Property Casualty Insurance Association (APCIA). Spokesman Mark Sektnan says Verisk’s model is a good one.

"We commend Commissioner Lara for his leadership in advancing catastrophe modeling in California — an important step toward stabilizing the state’s insurance market amid growing climate threats,” Sektnan said. “Catastrophe models are a proven tool used in every other state to better assess risk and ensure adequate coverage. We appreciate the Commissioner’s role in guiding two years of public input and collaboration to address this long-standing regulatory gap that left Californians increasingly vulnerable to climate-driven extreme weather. We look forward to working with the Department to remove remaining regulatory barriers and advance additional reforms needed to restore and protect access to insurance coverage for Californians.”

Source link: PropertyCasualty360.com — https://bit.ly/41cChlA