California's new wildfire safety regulation "a big burden for insurers"

"Too many homes... are burning down" – but will this law fix that?

California's new wildfire safety regulation "a big burden for insurers"

Catastrophe & Flood

By Bethan Moorcraft

Under the new law, all admitted insurance carriers in California must recognize and reward wildfire safety and mitigation efforts made by homeowners and businesses. They must also submit new rate filings that incorporate wildfire safety standards created by the CDI, and establish a process for releasing wildfire risk determinations to residents and businesses – all within 180 days of the enforcement date on October 17, 2022.  

“The short timeline of 180 days is a big burden for insurers because they’ve got to create a new rating plan that incorporates mitigation credits for [wildfire safety] criteria, they’ve got to integrate those mitigation factors into their underwriting workflow, and they’ve got to share new information with their policyholders,” said Tom Larsen (pictured), senior director of insurance solutions at CoreLogic. “It’s a very tight timeline [to achieve all of that] … and we expect there will be a very big backlog while the state properly evaluates and improves the new rate filings.”

To help homeowners and businesses meet the required wildfire safety standards and receive insurance discounts, the CDI has released a Safer from Wildfires framework in partnership with state emergency preparedness agencies. The framework includes 11 mitigation measures across three layers of protection, which insurers must factor into their rating, and use to provide consumers with a ‘wildfire risk score’:

  • Protecting the structure: Class-A Fire rated roof; maintain a five-foot ember-resistant zone around the home; non-combustible six inches at the bottom of exterior walls; ember and fire-resistant vents; upgraded windows (double paned or added shutters); and enclosed eaves.
  • Protecting the immediate surroundings: Cleared vegetation and debris from under decks; removal of combustible sheds and other outbuildings to at least a distance of 30 feet; and defensible space compliance.
  • Working together as a community: The community should have a clearly defined boundary and a local risk assessment with the local fire district or state – including an identified evacuation route, and funding for mitigation measures; and the community should seek the Fire Risk Reduction Community designation, and Shelter-in-Place designations.

“There are a lot of characteristics that didn’t make the [Safer from Wildfires] list,” Larson commented, before adding the mitigation measures that did are “easily identifiable” but challenging for insurers to determine in scale because manual inspections will be required.

“One of the features is ember and fire-resistant vents for attics and under floors, and they are so small that they need to be reviewed and assessed up close by a person. It’s a very difficult task for insurers to actually prove that those ember and fire-resistant vents are compliant,” Larsen added. “Some of the factors are easier to monitor. For example, insurers can use imagery and other types of remote reconnaissance to determine the distance between a home and any vegetation or combustible materials.”

Too many homes in California are burning down – but will insurance credits fix that?

As of December 5, 2022, CAL FIRE and the US Forest Services reported the following year-to-date (YTD) wildfire statistics:










5-year average



In the 2021 season, 286 structures were damaged and 3,560 structures were destroyed, according to CAL FIRE’s incident archive. Those statistics speak to the key issue, which is that “too many homes in California are burning down,” said Larsen.

“The state is coming in with a presumption that if the insurers will offer a credit, that will be sufficient to force homeowners to mitigate their fire risk,” he added. “That remains to be seen, but certainly if we look at other markets, that isn’t the outcome we normally see.

“Homeowners may have to remove bushes from near their home, or they may have to invest money to enclose the eaves on their roof. Very few people expect the credits offered by insurers will be sufficient to recapture their direct costs. It’s a bit naive to expect that just the offer of an insurance credit would cause people to significantly reduce the risk to homes.”

The new California law “doesn’t guarantee” a healthy insurance market 

Larsen urged insurers to remember that “simply satisfying the regulatory requirements doesn’t guarantee” that they will create a desirable or profitable insurance product for the market. That, he said, is the “big challenge” for the insurers, who are trying to simultaneously address the Safer from Wildfires framework, while offering compelling insurance solutions in a challenging marketplace.

“The complexity of this new regulation certainly does not make it easier to work in the state of California,” he told Insurance Business. “The state is working towards establishing a more competitive and viable insurance market, but it’s very difficult to say these regulations are a step forward. However, they are an effort in the right direction to try to minimize the risk - because that makes it a better insurance market. This initiative on its own is unlikely to be sufficient to really de-risk the state. I think there’s still a lot more that needs to be done or trying to reduce the risk.”

How can insurance agents and brokers help policyholders with this new regulation?

Homeowners and businesses benefit exponentially from proper wildfire risk mitigation, and Larsen encouraged agents and brokers to focus on those benefits when discussing the new regulation with clients.

“The benefits of these mitigations accrue to a homeowner whether or not they get an insurance credit,” he said. “Part of the goal of an insurance agent is to be the risk manager for your policyholder, and explain to them: ‘These are the wildfire safety features, and these are the very smart people that are recommending why these are good mitigations.

“It’s also important to maintain expectations. The financial credits that policyholders may get from one carrier to the next will probably not be a significant portion of the premium. The other value of an agent is to go above and beyond, and remind the homeowner and/or business owner that these are not the only credits or the only things they can do to lower their risk.”

A government website has been created, containing contact information for insurers operating in California – like State Farm and Allstate - that already offer discounts to customers for mitigating their fire risk.

What are your thoughts on California’s new wildfire safety regulation? Let us know in the comments section below.

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