Guides
California's home insurance crisis
Why California homeowners lost coverage, how the FAIR Plan became a major insurer, and what to do if you are dropped. Facts as of October 2026.
California's crisis is an availability problem more than a price problem. Wildfire losses grew faster than the premiums insurers were allowed to charge, the state's rules did not let them price for reinsurance or forward-looking wildfire models, and several large insurers responded by closing to new business or nonrenewing homes in fire areas. The result is a shrinking voluntary market and a FAIR Plan that now insures hundreds of thousands of homes.
How the squeeze happened
Three things collided.
Losses outran rates. Under Proposition 103 (1988), residential rates must be approved by the Department of Insurance (CDI) before use, and a personal-lines increase above 7% goes to a public hearing if a consumer requests one. The law also lets consumer groups intervene in rate cases and be paid for it. For about 30 years wildfire rates had to rest on historical losses, so a long run of mild years kept pricing low even as exposure grew. Insurers argue that this lag, combined with the review process, left them unable to price for a fire season like 2017 or 2018. Consumer advocates answer that public review catches overreach and that insurers decide how much risk to write. The intervenor and rate-review rules have been revised since; see California's Sustainable Insurance Strategy.
Reinsurance and rebuilding costs rose. Insurers could not include the cost of their own reinsurance in California rates until a regulation operative in January 2025. State Farm cited construction costs, catastrophe exposure and the reinsurance market when it closed to new business. See reinsurance costs and your premium and building materials, labor shortages and claim costs.
The losses were enormous. Aon puts insured losses from the January 2025 Palisades and Eaton fires at about $41 billion, the costliest wildfires on record worldwide. CDI's claims tracker showed 41,727 claims filed and $25.2 billion paid as of July 6, 2026. NAIC data show the State Farm group's 2025 direct loss ratio on California homeowners business was 236.11%, meaning it paid out $2.36 in losses for each premium dollar it earned that year in the state (a group-level figure that includes the fires).
Who stopped writing, and when
| Insurer | Action | Date |
|---|---|---|
| State Farm General | Stopped accepting new applications for property and casualty lines (not personal auto) | May 27, 2023 |
| State Farm General | Announced nonrenewal of about 30,000 homeowners and other property policies, and about 42,000 commercial apartment policies | Announced March 20, 2024 |
| Allstate | Stopped writing new residential policies, per CDI | 2022 |
| Farmers | Kept writing but capped new homeowners business, then removed the cap | Cap lifted November 21, 2025 |
Other carriers tightened underwriting in fire zones without announcing a formal exit. The California Earthquake Authority, citing CDI data, reported that statewide homeowners policies fell from 6,320,647 in 2024 to 6,052,334 in 2025, while dwelling-fire policies rose by 158,078. That shift matters: dwelling-fire policies are thinner than a homeowners form.
The FAIR Plan became a mass-market insurer
The California FAIR Plan is the insurer of last resort, set up to cover properties that cannot get a policy "through no fault of the property owner." It sells a basic fire policy with dwelling limits up to $3 million. The plan reported 696,562 policies in force in June 2026, up 157% since September 2022, with $768 billion of exposure, according to its published statistics. Growth slowed to about 16,000 residential policies in the first quarter of 2026, CDI said, from 35,000 to 50,000 a quarter from 2024 through September 2025.
The plan carries burdens that homeowners should understand.
- Coverage is basic. It covers fire, lightning, smoke and some other perils, not theft, water damage or liability. A broker can add a difference in conditions (DIC) policy; a package of the two can cost more than a standard homeowners policy, so compare the total. See FAIR plans explained: the insurer of last resort for homes.
- After the Los Angeles fires, the plan assessed members. CDI approved a $1 billion assessment on February 11, 2025. Insurers pay half, and subject to approval can recoup the rest from policyholders through a temporary fee. AB 226 now lets the plan use catastrophe bonds and credit lines.
- A big event can reach everyone. Assessments land on insurers' books and eventually on policyholders, so the FAIR Plan's size is a statewide issue, not just a risk for its customers.
Protections that exist today
California's law gives wildfire-area homeowners more protection than most states do.
- Notice. An insurer must send a nonrenewal at least 75 days before expiration, with a referral to CDI's California Home Insurance Finder. A late notice keeps the policy in force for 75 days from the date it is sent (Ins. Code 678).
- Moratoriums. After a governor-declared emergency, insurers cannot nonrenew homes in ZIP codes in or next to the fire perimeter for one year because of the wildfire (Ins. Code 675.1). CDI says moratoriums protected more than 1.2 million homeowners in 2025.
- Total loss rules. After a disaster total loss the insurer must offer at least two annual renewals. Since January 1, 2026, a wildfire total loss gets 60% of the personal property limit, up to $350,000, without an itemized inventory.
- Wildfire risk scores. Insurers that rate on wildfire risk must disclose your score at least 45 days before renewal and 75 days before a nonrenewal, and decide an appeal within 30 days. See wildfire risk scores and how insurers use them.
Where the market is turning
By September 18, 2026, CDI said 12 insurance groups had filed or won approval under the Sustainable Insurance Strategy, including an Allstate filing submitted August 31, 2026. In September 2026 State Farm filed guidelines to accept new applications for homes with an IBHS Wildfire Prepared Home designation, but CDI noted neither it nor Allstate was open for new business yet. Farmers' approved plan raises rates by a statewide average of 1.5%, and State Farm's emergency 17% homeowners rate increase (effective June 1, 2025) was kept in a March 2026 settlement. The mechanics are in California's Sustainable Insurance Strategy.
Be realistic about what that means. A filing is a promise to write in distressed areas over two years. It is not an open door for your address next month.
If you get a nonrenewal notice
- Read the notice for the date and the reason. Check the 75-day rule and whether a moratorium covers your ZIP code.
- Ask your agent for a re-rate. Some nonrenewals stem from wildfire score or roof age data that you can correct.
- Apply to several insurers and a broker at once, including regional and surplus lines carriers. Do not wait until week ten.
- Document mitigation. Class A roof, ember-resistant vents, enclosed eaves, five-foot noncombustible zone and defensible space can earn discounts under the state's Safer from Wildfires regulation. See home hardening for wildfire and insurance discounts.
- Use the FAIR Plan before you lapse. A policy gap can strand a mortgage lender. Then keep shopping; the FAIR Plan is meant to be temporary.
- Call CDI. The consumer hotline is 800-927-4357, and the nonrenewal action plan walks through each step.
Key takeaways
- California's problem is mostly availability: slow-moving rates, rising reinsurance and rebuilding costs, and record wildfire losses drove insurers to restrict new business.
- The FAIR Plan had 696,562 policies in June 2026, up 157% since September 2022, but it sells only basic fire coverage with a $3 million dwelling limit.
- State law gives you 75 days' nonrenewal notice and, after a declared wildfire, a one-year moratorium in affected ZIP codes.
- As of September 2026, 12 insurer groups had filed or won approval under the state's new strategy, but State Farm and Allstate were not yet open for new business.