The California Department of Insurance has unveiled a draft regulation designed to strengthen long-term solvency safeguards across the state’s insurance market.
The goal – avoid future crises triggered by climate disasters, cyberattacks, or reckless use of artificial intelligence.
The framework lines up with global regulatory efforts led by the International Association of Insurance Supervisors and draws on standardized climate-risk disclosures.
It also integrates the United Nations’ Principles for Sustainable Insurance and the Sustainable Development Goals, according to the department.
Insurance Commissioner Ricardo Lara said the pace of technological change is overwhelming legacy systems.
Technology’s racing ahead while our regulatory tools lag behind. We have to anticipate emerging risks if we want to keep companies solvent and protect consumers.
Ricardo Lara, Insurance Commissioner
The proposal demands insurers document not only risks but also opportunities tied to innovation, climate shifts, and economic transition.
They’ll need to model exposures to threats like AI misuse, poor data quality, and cybersecurity breaches – projecting outcomes through 2030, 2040, and 2050.
Companies must also outline mitigation strategies for climate impacts such as sea-level rise, shifting land use, and water scarcity.
The rule adds another layer: testing resilience under transition risks linked to new technologies and declining dependence on carbon-heavy systems.
Stress tests for climate scenarios across three future decades will become mandatory.
Lara said the draft reflects insights gained from international cooperation and years of navigating environmental and tech-driven volatility.
“We’re facing a new frontier of risk,” he said, “and the only way forward is smarter, modern regulation.”
A public meeting on Nov. 14 will open the floor for industry and consumer feedback.
The American Property Casualty Insurance Association said it’s reviewing the regulation, adding that maintaining solvency sits at the center of the department’s responsibilities.
