California's Sustainable Insurance Strategy

The Sustainable Insurance Strategy (SIS) is the California Department of Insurance's trade: insurers get to use forward-looking wildfire models and the cost of their reinsurance in rates, and in exchange they must write more policies in wildfire-distressed areas. Commissioner Ricardo Lara announced it on September 21, 2023, and the two main rules took effect in December 2024 and January 2025. Whether it works depends on how many insurers file, how fast rates are approved and whether new policies actually reach the hardest-hit ZIP codes.

The trade

Before the SIS, California homeowners rates had to be built on historical wildfire losses, with no allowance for the cost of reinsurance. Insurers said that made it impossible to price for a risk that was changing, and several stopped writing new business (california's home insurance crisis). The department's counter-offer had four parts.

These items are summarized from the department's releases and the regulation text. Catastrophe models also have to clear a review before an insurer can use them: CDI began accepting petitions on January 2, 2025, approved the Verisk wildfire model on July 24, 2025 and said on August 1, 2025 that models from Verisk, Karen Clark & Company and Moody's were available to all insurers. To understand what a model does to your price, read how catastrophe models shape your premium.

The 85% commitment, in plain terms

The rule is easy to misread, so here are its terms.

• What it is. An insurer that uses a catastrophe model or the reinsurance cost in a filing must, within two years (730 days) of rate approval, write in distressed areas at least 85% of its statewide market share. Say an insurer has a 10% share of the statewide market. To meet the standard, it needs to have in distressed areas 8.5% of the total homes the market writes there (our illustration, not a quoted example).
• The 5% alternative. Instead of the 85% target, an insurer may commit to grow its distressed-area exposure by 5% over the same two years. For reinsurance filings it must then add 5% in each later two-year period until it reaches the 85% standard.
• What counts. Qualifying residential policies in distressed areas and policies on moderate-to-very-high wildfire-risk homes taken out of the FAIR Plan.
• Failure. An insurer that cannot meet the commitment must file a new rate application renouncing it, and that application may not use catastrophe modeling or reinsurance costs.
• Small insurers. Companies with less than $10 million of California premium for qualifying residential policies may defer.

A "distressed area" is defined in 10 CCR 2644.4.8(a). In one test it is a ZIP code that overlaps a CAL FIRE high or very high fire hazard severity zone and either has at least 15% of its qualifying residential properties insured by the FAIR Plan, or a premium of at least $4.00 per $1,000 of Coverage A with median income at or below the state's 50th percentile. Distressed counties are separately defined in the rule.

What has happened so far

• December 20, 2025. CDI approved its first SIS rate filing, from Mercury Insurance, which committed to more than 38,000 new policies over time and more than 6,000 over two years. A second filing, from CSAA, was approved the same day.
• May 12, 2026. CDI approved Farmers' filings. Farmers said its approved plan raises rates by a statewide average of 1.5%, and it pledged to market to at least 300,000 policyholders in wildfire-distressed areas.
• July 23, 2026. CDI listed expansion requests from Liberty Mutual and USAA (expanded homeowners access effective January 2027), new entrant MS Transverse and PURE for high-value homes.
• September 18, 2026. CDI said 12 insurance groups had filed or received approval, including an Allstate filing submitted August 31, 2026. In September 2026 State Farm filed underwriting guidelines for homes with an IBHS Wildfire Prepared Home designation. CDI said neither company was open for new business yet.

Rates still move. State Farm General received an emergency interim 17% homeowners increase effective June 1, 2025 on condition of a $400 million capital infusion, and a March 2026 settlement kept homeowners at 17%. Under that settlement State Farm agreed to no new block nonrenewals of homeowners policies during 2026 and to return for rate review no later than 2027, according to the settlement reporting. (The final order's July 2026 date comes from Consumer Watchdog, a party to the case; CDI had not issued a release on it that we found.)

The FAIR Plan side

The strategy also reached the insurer of last resort. A July 2024 order let the plan offer higher commercial limits and set a funding order if its reserves run out: member insurers pay half of losses up to $2 billion, and the other half could be recouped from policyholders. In February 2025 CDI approved a $1 billion assessment after the Los Angeles fires. The department says growth has slowed: about 16,000 residential policies were added in the first quarter of 2026, against 35,000 to 50,000 a quarter from 2024 through September 2025. AB 226 allows catastrophe bonds and credit lines from January 1, 2026. See FAIR plans explained: the insurer of last resort for homes.

How it affects your policy

Premium. The strategy is designed to let wildfire-zone rates rise to reflect modeled risk, while creating pressure to write there. Homes in lower-risk ZIP codes might see smaller changes. Do not assume a lower price. Farmers' approved average of 1.5% shows how one filing came out, but your rate depends on your insurer's filing and your own mitigation.

Mitigation discounts. The Safer from Wildfires regulation requires insurers that price wildfire risk to give discounts for a Class A roof, ember-resistant vents, enclosed eaves, a five-foot noncombustible zone and defensible space, among others. It does not set percentages, so ask each insurer to list them. Models now have to credit mitigation as well. See home hardening for wildfire and insurance discounts.

Wildfire scores. If your insurer rates on wildfire risk, you are entitled to your score before renewal and a 30-day appeal window (10 CCR 2644.9). Check the data: roof type, distance to neighbors, year built.

Availability. The commitment is measured by insurers' exposures, not by whether a given address gets accepted. Ask each carrier directly whether it is taking new business in your ZIP code.

The honest debate

Supporters, including the department and the insurers that have filed under it, say that without model-based pricing and reinsurance, insurers will keep leaving and the FAIR Plan will keep growing. Consumer advocates, notably Consumer Watchdog, argue that the rules hand insurers higher rates without guaranteeing coverage, and they have used the state's intervenor process to challenge filings. The revised intervenor regulation, described by CDI as the first overhaul in 35 years, now requires status updates every 30 days, discloses intervenors' funding sources and posts hearing calendars. CDI says intervenors received more than $14.4 million in compensation from 2013 to 2026. Reasonable people differ on whether that process protects consumers or delays rates.

What to do now

1. Ask your current insurer whether it has filed under the SIS and what it will do for your ZIP code.
2. Request your wildfire risk score and fix wrong data.
3. Photograph and document every mitigation feature; ask for each discount by name.
4. If you are on the FAIR Plan, ask a broker for a recheck at least once a year, since SIS carriers may take FAIR Plan policies out.
5. Use the home insurance rules by state for the California Department of Insurance contact details.

Key takeaways

• The SIS lets insurers use approved wildfire models and a standard reinsurance cost in rates, in exchange for a commitment to write in distressed areas.
• The commitment is 85% of statewide market share in those areas within two years, or a 5% increase in exposures as a first step.
• As of September 18, 2026, 12 insurer groups had filed or won approval, but approval is not the same as accepting your application.
• Mitigation discounts and wildfire-score appeals are part of the package; use them.