California Insurers Must Now Plan for Risks Through 2050

California - based insurance companies will now be required to evaluate how climate risks, artificial intelligence, cyber threats, technological disruption, and other developing challenges and opportunities could affect their financial strength, operations, investments, and underwriting strategies over time. Companies will provide the Department with forward-looking information about how they are analyzing and preparing for these risks, with enhanced requirements for companies writing more than $50 million in direct annual premiums nationwide.

The final regulation builds on the framework that Commissioner Lara proposed this June, which was followed by a public hearing in July, and caps years of work during his nearly eight-year tenure as Insurance Commissioner to modernize California’s insurance oversight. This regulation will also help give future Insurance Commissioners a lasting framework to protect consumers and keep the insurance market stable as risks continue to evolve and change.

Strengthening Consumer Protection Before Crisis Strikes

Every insurance policy is a promise. Consumers pay premiums today with the expectation that insurance companies will financially be able to pay claims tomorrow. The regulation strengthens the ability of regulators to monitor developing risks before they threaten that promise and requires covered insurance companies to prepare for challenges before they become financial vulnerabilities.



“This regulation reflects a simple belief: protecting consumers means preparing for the future, not reacting to it,” said Commissioner Lara. “The questions confronting California are increasingly the same questions confronting insurance regulators around the world. This framework ensures that we are not simply responding to those conversations but helping shape them.”

What Leaders and Experts Are Saying

“Long-term solvency strategies for insurance companies are foundational to financial resilience in the face of technological change and climate threats,” said Yoshihiro Kawai, Chair of Global Asia Insurance Partnership (GAIP) and Southeast Disaster Risk Insurance Facility (SEADRIF). “Forward-looking risk management tools, like scenario analysis, bring together planning for emerging risks and closing insurance protection gaps, which are both critical for future sustainability.”

“Resilience is a shared responsibility that requires cross-border cooperation and a long-term commitment from insurance supervisors. Commissioner Ricardo Lara’s leadership and sustained commitment have been instrumental in making climate resilience and catastrophe risk key priorities on our shared agenda” said Guillermo Plate, President of the Association of Insurance Supervisors of Latin America and Superintendent of Insurance of Argentina. “Forward-looking strategies for long-term solvency can help build more resilient insurance markets and better protect our communities against future risks.”

“Insurance risks do not stop at national borders, which makes collaboration among regulators more important than ever,” said Steven Rothstein, Managing Director, Ceres Accelerator. “Commissioner Lara has been a strong partner on creating climate risk strategies and turning international lessons into action in California. His regulation shows how forward-looking, accountable planning can strengthen future insurance supervision, better protect policyholders, and lead to more sustainable economies.”

“The combined impacts of advances in risk assessment technology and damaging weather events associated with climate change are profoundly altering the property insurance ecosystem,” said Amy Bach, Executive Director of United Policyholders. “Effectively coordinating with other regulators and stakeholders with a forward looking eye to ensuring that insurance safety nets will continue to be in place for people and businesses impacted by disasters will be part of Commissioner Lara's legacy of leadership in a fast-evolving commercial environment. We commend him and his administration for advancing this important regulation.”

“We are in an era of rapidly changing risks, from the rising impacts of weather-related extremes as the planet warms to the breakneck pace of technological change,” said Carolyn Kousky, Executive Director and Founder, Insurance For Good. “Improving our risk management and investing in reducing risk, however, takes time and insurers should not begin this work only after losses have been devastating. By asking insurers to plan for 2030, 2040 and 2050, California is pushing the industry to prepare for the risks that are coming, not just the ones we’ve already seen.”