The California insurance market is seeing the return or recommitment of some familiar corporate faces.
California Gov. Gavin Newsom and the state’s Department of Insurance announced last week that five insurers — including three of the top 10 based on market share — have recommitted to providing coverage to California residents.
“We just had four of our admitted market come back in,” Newsom told former President Bill Clinton during a conversation at the Clinton Global Initiative event in New York City. “In fact, two days ago, we had our fourth come back in. We had a lot of folks who were leaving the market. [They] simply said … it’s too expensive and the losses are too significant.”
The total is now up to five companies: California Casualty, CSAA, Mercury General, Pacific Specialty, and USAA.
Some, like Mercury General and USAA, never ceased writing coverage in the state.
Whether it’s a reintroduction or a recommitment, insurers point to California’s regulatory changes as having a big impact on their ability to do business in the state.
California Casualty, in particular, mentioned the state’s Sustainable Insurance Strategy, championed by State Insurance Commissioner Ricardo Lara. The strategy allows insurers to enhance their risk calculations by considering additional factors, including reinsurance expense and the possibility of potential catastrophes.
In exchange, insurers must pledge to provide more coverage to areas with high wildfire risk across the state.
California Casualty announced a rate increase request of 6.9% last week, and the insurer has also pledged to take on policies that the California FAIR Plan, the state’s insurer of last resort, previously covered.
Mercury is also seeking a 6.9% rate hike based on the state’s newly adopted wildfire catastrophe model, with analytics coming from Minnesota-based software company Verisk. Lara’s office has approved the use of the model. It’s designed to help insurers better assess risk in potentially high-damage areas.
The state of California is also building its own wildfire catastrophe model. Insurers don’t have to use the public model, but it will give consumers, regulators, and legislators a basis of comparison when evaluating rate increases tied to wildfire risks.
While Newsom acknowledged California’s policy shift has brought increased attention from insurers back to the state, he said more needs to be done on a national level to solve the insurance crisis many states are facing.
“I think this issue requires leadership at the national level. It is under-resourced, under-focused,” Newsom told Clinton during their discussion. “It’s a challenge for me, it’s a challenge for [Gov.] Ron DeSantis in Florida, for governors in most states. But it’s not, I think, top of mind, and we need to be more focused on it.”
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