Why Insurers Are Leaving California

California's home insurance market has fractured under the combined weight of catastrophic wildfire losses, surging reinsurance costs, and decades of regulatory constraints that prevented insurers from pricing risk accurately. The result: a market in freefall.

The Big Three Pull Back

State Farm, Allstate, and Farmers — three of the largest home insurers in the country — have each taken dramatic steps to limit their California exposure:

• State Farm stopped accepting new homeowners applications in California in May 2023 and non-renewed approximately 72,000 policies in 2024. Following the devastating January 2025 Los Angeles wildfires — which cost State Farm an estimated $6.2 billion in claims — the company sought an emergency 22% rate hike. In March 2026, State Farm reached a settlement with state regulators to maintain a 17% average rate increase.
• Allstate quietly stopped writing new California home policies as far back as 2022 and has since non-renewed tens of thousands of customers in high-risk ZIP codes.
• Farmers paused new homeowners policy applications in 2023 but has since announced plans to expand coverage to approximately 300,000 additional customers in wildfire-distressed areas under the state's new Sustainable Insurance Strategy framework, paired with a 6.9% rate increase request effective July 2026.

What's Driving the Crisis

Several compounding factors have pushed California's insurance market to the breaking point:

The reinsurance problem deserves special attention. Reinsurance — the insurance that insurance companies buy to protect themselves — became dramatically more expensive globally after a string of billion-dollar disasters. California's previous rules barred insurers from factoring those real costs into premiums. A December 2024 rule change finally allowed it for the first time, but the cost pass-through could add another 40–50% to some premiums.

California's Sustainable Insurance Strategy: What Changed

Insurance Commissioner Ricardo Lara launched the Sustainable Insurance Strategy (SIS) in 2023 to rescue the collapsing market. It represents the most significant overhaul of California insurance regulation in decades.

Key Reforms Under the SIS

1. Catastrophe Modeling Approved For the first time, insurers can use forward-looking catastrophe models — powered by the best available climate science — to set rates. Previously, California required companies to price risk based only on historical loss data, which dramatically underestimated future wildfire exposure in a warming climate.

2. Reinsurance Cost Recovery The SIS allows insurers to recover legitimate reinsurance costs in their rate filings. In exchange, participating insurers must commit to writing policies in wildfire-distressed ZIP codes.

3. 85% Market Share Commitment Insurers that take advantage of SIS pricing reforms must write at least 85% of their statewide market share in high-risk areas — meaning they can't cherry-pick only the safe ZIP codes.

4. Faster Rate Reviews The CDI has committed to the fastest, most transparent rate review process in California history, with all SIS-approved filings completed within the public-notice timeline.

As of early 2026, five insurers — Mercury, CSAA, USAA, Pacific Specialty, and California Casualty — have received SIS-approved rate filings and made binding commitments to expand underwriting in wildfire-distressed ZIP codes. Insurance Commissioner Lara projects visible consumer relief within 12–24 months as more carriers reopen or expand, with full structural market recovery expected over 3–5 years.

New legislation is also accelerating reform. In February 2026, Senator Wiener introduced the Affordable Insurance and Wildfire Safety Act to further lower costs for Californians. Meanwhile, new 2026 laws require insurers to pay 60% of contents coverage limits (up to $350,000) upfront when customers lose their home in a qualifying disaster — up from the previous 30%.

The FAIR Plan: California's Insurer of Last Resort

As private carriers retreated, hundreds of thousands of homeowners were funneled into the California FAIR Plan — a state-mandated pool backed by all licensed California insurers.

FAIR Plan By the Numbers (as of December 2025)

The January 2025 LA wildfires exposed severe weaknesses in the FAIR Plan. The CDI found the plan failed to comply with 17 critical recommendations related to financial condition, corporate governance, and consumer protections — leaving wildfire survivors struggling with delays and denials. Commissioner Lara approved a $1 billion assessment on member insurers to shore up FAIR Plan finances, with a portion of costs ultimately passed to policyholders through a 17% average premium increase for homeowners.

What the FAIR Plan Covers (and What It Doesn't)

The FAIR Plan provides basic fire and smoke coverage — but it is not a full homeowners policy. Major gaps include:

• ❌ No liability coverage
• ❌ No theft coverage
• ❌ No water damage coverage
• ❌ No additional living expenses (ALE)
• ✅ Fire, smoke, and select named perils
• ✅ Coverage up to $3 million per dwelling

The proposed Make It FAIR Act (AB 1680) would require the FAIR Plan to offer comprehensive homeowners coverage options comparable to standard insurance — a significant improvement over today's bare-bones product.

How to Find Home Insurance in California in 2026

Despite the crisis, coverage options exist. Here's a practical roadmap for California homeowners.

Step 1: Shop Regional and Specialty Carriers First

While national carriers have pulled back, regional and surplus-lines insurers are actively writing California policies. Work with an independent insurance agent who has access to multiple markets — they can shop regional carriers that may not be widely advertised. The CDI website maintains a directory of licensed insurers writing in California.

Step 2: Harden Your Home for Wildfire Resistance

Home hardening is the single most impactful thing you can do to improve both your insurability and your premium. California's Safer from Wildfires regulations require admitted insurers to offer discounts for documented mitigation measures — typically 5–20% off your premium.

High-Impact Hardening Steps:

The new California Safe Homes Act (AB 888) established a grant program at the CDI to help eligible homeowners afford critical hardening upgrades, particularly fire-safe roofs and Zone 0 mitigation.

Under AB 1 (the Insurance and Wildfire Safety Act), a bill pending in 2026 would require insurers to mandate coverage for fire-resistant homes starting January 2028 — with financial penalties for insurers that refuse.

Step 3: Understand When FAIR Plan Is Necessary

If you've been non-renewed and cannot find private coverage, the FAIR Plan is your legal right as a California property owner. Here's how to approach it:

If you end up on the FAIR Plan:

1. Buy a DIC wrap-around policy to fill coverage gaps (liability, theft, water damage, ALE)
2. Continue shopping the private market every 6 months as SIS reforms attract more carriers back
3. Document all hardening improvements — they'll help you qualify for private coverage sooner

Step 4: Know Your Moratorium Rights

Under California Insurance Code § 675.1, if a Governor's state of emergency is declared for a wildfire in your area, insurers are prohibited from canceling or non-renewing your residential policy for wildfire risk for one year from the declaration date — even if your home was not damaged.

Current active moratoriums (as of March 2026) include:

• Pack Fire (Mono County) – through December 9, 2026
• Gifford Fire (Santa Barbara & San Luis Obispo Counties) – through December 23, 2026

If you received a cancellation or non-renewal notice in a covered area, contact the CDI at 1-800-927-4357 — insurers must rescind those notices.

Understand the full picture of why home insurance rates are increasing and check average home insurance costs by state to benchmark what you should be paying.

Frequently Asked Questions

Why did State Farm stop writing home insurance in California?

State Farm cited unsustainable wildfire losses, soaring reinsurance costs, and inflation in rebuilding expenses that made California policies unprofitable under the state's legacy rate regulations. After the January 2025 LA wildfires cost the company an estimated $6.2 billion, State Farm sought emergency rate relief. In March 2026, the company reached a settlement to maintain a 17% average rate increase and has paused mass non-renewals through 2026.

What is the California FAIR Plan and is it good coverage?

The FAIR Plan is California's insurer of last resort — a state-mandated pool that provides basic fire and smoke coverage to homeowners who can't get private insurance. It covers up to $3 million per dwelling but does not include liability, theft, water damage, or additional living expenses. Most homeowners need to pair it with a DIC (Difference in Conditions) policy to have adequate protection. Read our full breakdown in our California FAIR Plan guide.

How much does home insurance cost in California in 2026?

California home insurance premiums vary widely depending on location and risk. The statewide average for $300,000 in dwelling coverage is approximately $1,641 per year, but homeowners in high-wildfire-risk areas — particularly in Southern California — are seeing annual premiums of $3,900 to $6,100 or more. That compares to a national average of roughly $1,700–$2,000 per year.

What is California's Sustainable Insurance Strategy?

The Sustainable Insurance Strategy (SIS) is a sweeping insurance market reform launched by Insurance Commissioner Ricardo Lara. It allows insurers — for the first time — to use forward-looking catastrophe models to set rates, recover reinsurance costs in their filings, and price risk more accurately. In exchange, participating insurers must commit to writing policies in wildfire-distressed ZIP codes. The goal is to attract carriers back to California's private market and reduce dependence on the FAIR Plan.

How can I make my home more insurable in California?

The most effective steps are home hardening and defensible space. Replace your roof with Class A-rated materials, install ember-resistant vents, upgrade to double-pane windows, clear all combustible materials within 5 feet of your home, and remove combustible fencing within 8 feet of the structure. Document every improvement with photos and receipts. Under California's Safer from Wildfires regulations, admitted insurers are required to offer discounts — typically 5–20% — for documented mitigation measures.