Even low-risk homes are caught up in California’s climate insurance crisis

As another wildfire season nears, a growing number of California homeowners are discovering their insurers have stepped back—even in neighborhoods with relatively low fire danger. Many are being pushed onto the state’s insurer of last resort, the FAIR Plan, where coverage is more limited and costs are rising.

The FAIR Plan was created as a safety net for people who couldn’t find coverage in high-risk wildfire zones, defined by vegetation, terrain, and weather. But the state’s recent run of catastrophic fires, including last year’s $40 billion Los Angeles blaze, has driven a broader retreat from the market. Enrollment in the FAIR Plan jumped roughly 43% from late 2024 through 2025.

What’s changed is where those policies are showing up. An analysis of FAIR Plan data indicates roughly 14% of current policies now cover properties in largely urban, lower-risk areas, and about 28% of the plan’s total exposure sits in those zones. In short, pressure that began in high-hazard regions has spilled into places long considered safe bets.

“The problems that started in high fire-risk areas have spread into the rest of the market,” said Michael Wara, who directs the climate and energy policy program at Stanford University.

California’s insurance crunch is now prompting a two-track response: make it faster and more predictable for companies to charge rates that reflect risk, and require stronger consumer protections in the wake of the LA fires that destroyed about 12,000 homes and exposed widespread underinsurance.

Rewiring a strained market

Under California’s highly regulated system, it can take a year or more for insurers to win approval for a rate increase. Regulators have promised swifter reviews and more flexibility to incorporate wildfire risk, hoping to entice carriers to write policies again in hard-hit regions. At the same time, lawmakers—galvanized by gaps revealed after the fires—are advancing bills meant to ensure access and fairness.

“The market is fragile,” said Mark Sektnan, a vice president at a leading property-casualty industry group. “Depending on what the legislature does, California can look more welcoming—or less—to companies considering expansion or return.”

One proposal would require insurers to write and renew coverage in high-risk areas for owners who harden their homes against fire, or face a potential five-year suspension from selling in the state. Another would require companies to offer guaranteed replacement of a destroyed home, after many Los Angeles residents learned they were significantly underinsured.

The FAIR Plan’s expanding role—and risks

A separate bill backed by the state insurance regulator would allow the FAIR Plan to offer comprehensive homeowners coverage. The plan, which now writes nearly one in ten residential policies statewide, currently provides fire-only policies, forcing homeowners to patch together other protections elsewhere.

Consumer advocates say the priority should be moving people off the FAIR Plan and back into the private market, not making FAIR more attractive. “FAIR was never meant to match private insurance,” said Amy Bach of United Policyholders. “We don’t want people to stay on FAIR if there’s a viable private option.”

Deputy Insurance Commissioner Michael Soller said the goal is to ensure families have full coverage when they must use FAIR—“but only as a short-term solution.” The FAIR Plan has said it is reviewing the proposal.

Another complication: price signals. FAIR’s relatively low premiums in some areas may be pulling customers away from private carriers. “You can’t depopulate FAIR if it’s priced competitively—or below—what’s available in the market,” Sektnan said.

Early signs of stabilization

There are hints the private market may be stirring. After surging for much of 2024 and 2025, FAIR Plan enrollment grew by less than 4% in the final quarter of last year. The Department of Insurance has approved or is reviewing rate increases from several major carriers under a “sustainable insurance” approach that trades quicker review times for concrete commitments to write more policies in high-risk zones.

“Companies are detailing plans to stay and grow here,” Soller said. “We’re seeing early signs of a turn.”

For example, Farmers, the state’s second-largest home insurer by market share, has requested nearly a 7% rate hike and pledged to market to roughly 300,000 consumers in high-wildfire-risk areas starting in 2026, with a goal of adding about 5,600 policies in those locations over two years. CSAA said in a 2025 filing that it has issued 18,300 more policies in high-fire-hazard areas than required. Mercury set a two-year target to grow policies in high-risk zones by 15% and, over eight years, aims to move about 6.5% of FAIR Plan customers onto its books.

Industry representatives argue that even faster rate reviews are needed; otherwise, inflation can undercut approved premiums before they take effect. Regulators say they’re accelerating: the insurance department recently completed rate assessments in about 120 days and is targeting 60-day reviews. “We’re not out of the woods,” Insurance Commissioner Ricardo Lara told lawmakers. Building a sturdier market, he said, will take three to five years.

What it means for homeowners now

For many households—some far from the wildland-urban interface—the immediate reality is narrower choice and higher costs. More owners are being steered to the FAIR Plan, which can leave gaps unless paired with additional policies, and fewer carriers are competing to write in certain ZIP codes.

Longer term, the question is whether California can balance carrots and sticks: pricing that reflects growing climate risk, accountability for companies and consumers, and smarter land-use and mitigation that reduce losses. If it succeeds, the state could model a path forward for other regions confronting intensifying wildfires, hurricanes, and floods—and the insurance turbulence that follows.