California's homeowners insurance market is absorbing a new wave of rate increases. The pressure arrives as lawmakers weigh changes to how wildfire costs are allocated between utilities, insurers, and policyholders.
The California FAIR Plan's 29.1% rate increase takes effect October 15, per the California Department of Insurance. The plan initially sought 35.8%. State Farm's 17% emergency rate increase, approved by regulators in May 2025, was confirmed in a March settlement.
FAIR Plan enrollment grew 43% between September 2024 and December 2025, according to FAIR Plan data. The January 2025 Los Angeles wildfires drove much of that increase. Total FAIR Plan exposure reached $750 billion by March, a 242% increase since September 2022 based on data gathered by Amwins.
In the highest-risk ZIP codes, approximately 41% of residential structures now carry a FAIR Plan policy, compared to 4% in lower-risk areas.
At the center of the legislative debate is a question of who bears the cost of utility-caused wildfires. California's inverse condemnation doctrine holds utilities responsible for wildfire damage caused by their equipment, regardless of negligence. Subrogation gives insurers the right to recover paid wildfire claims from those utilities.
Senate Bill 254 (Becker, 2025), signed by Gov. Gavin Newsom, required a study of wildfire liability options. The study, produced by the California Wildfire Fund administrator, examined approaches including eliminating inverse condemnation.
Utilities have argued the current framework exposes the state's $40 billion Wildfire Fund to depletion. Insurers counter that eliminating subrogation would remove their right to recover wildfire costs and shift those losses to policyholders.
A political action committee called the Coalition for Homeowners Insurance Reform, funded by investor-owned utilities, was disclosed by the American Property Casualty Insurance Association (APCIA). The group said the PAC was designed to pressure lawmakers on the liability question. The utilities have not publicly stated their position in response to APCIA's characterization.
APCIA estimates that a shift in utility wildfire liability to insurers could raise statewide homeowners premiums by 10% to 20%. The trade group has not published the methodology behind that figure.
California's three largest investor-owned utilities spent a record $16.7 million lobbying state lawmakers in the 2025–2026 legislative session, according to Consumer Watchdog. The group cited California Secretary of State Cal-Access disclosures. The utilities were Pacific Gas & Electric (PG&E), Southern California Edison, and Sempra Energy.
The legislative session runs through the end of August. Proposed changes to utility wildfire liability could advance through a gut-and-amend process. That procedure allows lawmakers to replace pending legislation with entirely new text in a matter of days, according to CalMatters.
