The California Department of Insurance published a news release providing information on its new catastrophe modeling and ratemaking regulation. This is part of their Sustainable Insurance Strategy, which aims to increase the availability of insurance coverage in areas at risk of wildfire and enhance the stability of the market.

The regulation requires major insurance companies to write policies in high-risk areas of at least 85% of their California market share. There is currently no regulation that requires insurers to provide insurance to wildfire-distressed areas at any level. The Department will allow insurers to charge high premiums for the increased risk.

California regulations require insurers to apply a catastrophe factor based on historical wildfire losses. However, many of these models take into account major wildfires but do not consider risk mitigation techniques employed by insureds, thus causing premiums to bloat. The new regulation requires insurers to account for the mitigation efforts taken by insureds in catastrophe modeling.