If you own a home, you must have homeowner’s insurance. You can’t even get a mortgage without it. Yet many insurers have abandoned California, or simply canceled policies as they came up for renewal. This situation has recently worsened, and many homeowners have been forced into the costly and inadequate FAIR Plan. Without a solution, our economy will crash, taking the national economy with it.

In 1988, voters approved Proposition 103, which granted extraordinary powers to the state’s Insurance Commissioner, including authority over rate increases. Other guidelines were adopted that prohibit insurers from passing along the cost of re-insurance, which insurers buy to cover big losses. They were also prohibited from using forward-looking threat assessments to measure risk. Recent disastrous wildfires throughout the state, combined with high inflation that escalates rebuilding costs, have generated a crisis threatening the well-being of millions.

Now however, there’s an agreement involving Insurance Commissioner Ricardo Lara, the Governor and major insurance companies aimed at bringing insurers back into the state. The solution includes the use of “catastrophe modeling,” which uses our increased understanding of conditions that produce destructive wildfires when assessing future risks - something I’ve long advocated. Because rates were frozen or only incrementally raised these past few years, leading insurance companies have requested rate increases from 28% to almost 40% and, if approved by the Commissioner, rates could increase by those amounts overall. However, the increases could be distributed among homeowners based on risk. Homes in the city, for example, might see little or no increase, while homes on brushy hilltops could see large premium increases.

We also must have better vegetation management at the wildland-urban interface. By eliminating fuels that generate wildfires, the risk assessment for homes throughout California will improve, and we’ll have fewer fires and lower insurance costs.

For now, there’s a deal in place but there’s no written agreement. I’m withholding judgement until I see one. As always, ‘The devil is in the details.’