- California’s homeowners insurance market is under growing pressure from wildfire losses, with premiums rising, private insurers reducing coverage in high-risk areas, and FAIR Plan enrollment increasing by more than 200% from 2019 to 2025.
- EDF argues that long-term insurance affordability depends on wildfire risk reduction, including home hardening, defensible space and community-level mitigation, with insurers more consistently reflecting those measures in pricing and coverage decisions.
- EDF warns against creating a separate state-backed wildfire insurance program, which the SB 254 report estimates could require up to $25 bn in capital, and instead supports continued Sustainable Insurance Strategy reforms, mitigation investment and targeted affordability assistance.
California’s homeowners insurance market is facing growing pressure as wildfire losses push insurers to raise premiums, restrict coverage and withdraw from higher-risk areas, according to the Environmental Defense Fund (EDF).
The effects extend beyond insurance. Homeowners coverage is generally required for mortgages, meaning reduced availability and higher premiums can affect housing markets as well as households’ ability to recover after disasters.
The source states that premiums in California’s high-risk areas rose 80% “between 2025 and 2022,” but the date range appears inconsistent and cannot be verified from the supplied material.
More homeowners are also moving to California’s insurer of last resort, the FAIR Plan, as private-market capacity contracts in higher-risk areas. FAIR Plan policy growth exceeded 200% between 2019 and 2025, according to EDF.
California regulators have responded through the Sustainable Insurance Strategy (SIS), which is intended to improve market availability and stability.
EDF argues that regulatory changes alone will not address rising insurance costs unless they are accompanied by measures that reduce expected wildfire losses.
The organization identifies home hardening, defensible space, community-level mitigation and landscape treatments as measures that can reduce wildfire exposure. It argues that coordinated investment across individual properties, communities and surrounding landscapes is needed to improve insurability over the longer term.
California already requires insurers to consider several wildfire mitigation measures when setting prices, including home hardening and defensible space. Insurers must also offer community-level discounts for properties in Firewise USA communities.
The SIS does not prescribe specific discounts, and EDF cited research showing that insurers vary considerably in how they recognize mitigation. Policyholders also have limited visibility into which measures qualify for discounts or how much those actions could reduce premiums.
EDF said the California Department of Insurance should establish a more consistent and transparent relationship between verified wildfire mitigation and insurance pricing. Greater clarity would allow homeowners and communities to assess which investments could reduce both physical losses and insurance costs.
The SB 254 report also proposes Build-Back-Better insurance endorsements, which would provide additional claims funding for homeowners rebuilding with wildfire-resistant materials after a loss.
Such endorsements are already used in other US markets for measures such as hurricane-resistant roofs, according to EDF. California could require insurers to offer similar wildfire endorsements covering some home-hardening costs that also qualify for premium discounts.
EDF was more critical of proposals in the SB 254 report that would separate wildfire coverage from standard homeowners insurance and place it into a state-backed program.
The organization said concentrating wildfire exposure in a standalone insurer could increase costs rather than reduce them because insurance generally depends on diversifying risks. The SB 254 report estimates that a state-sponsored wildfire insurer could require up to $25 bn in capital.
EDF cited the federal National Flood Insurance Program and California Earthquake Authority as examples of single-hazard programs that have faced difficulties involving debt, affordability and policy uptake.
A separate proposal to eliminate insurer subrogation also requires caution, EDF said. Subrogation allows insurers that have paid wildfire claims to seek reimbursement from utilities when those utilities are found responsible for a fire.
Removing that mechanism could reduce financial exposure for utilities but cost insurers billions of dollars, according to the SB 254 report. EDF said those costs could be passed to policyholders through higher premiums or reduced coverage.
Rather than transferring wildfire risk into a separate state program, EDF supports additional investment in mitigation and suggested testing targeted, means-tested assistance for households that continue to struggle with insurance affordability.
The organization said California should continue implementing the Sustainable Insurance Strategy while improving transparency around how wildfire risk reduction affects underwriting, premiums and coverage availability.
