Insurance proposal in Democrat-run state falls short as wildfires rage
Massive Palisades Fire broke out Tuesday afternoon, prompts mandatory evacuations
FOX Business' Cheryl Casone breaks down the potential economic impact of the wildfires in Los Angeles as the flames continue to engulf local communities.
California residents’ homes and iconic landmarks are now at the mercy of the raging Palisades Fire, and state legislation for expanding insurance access across the Golden State may have come too late.
Just before the New Year, the California Department of Insurance announced it had reached the final step in passing the "Sustainable Insurance Strategy," which, according to the text of regulation, would require insurance companies to increase coverage in high-risk, wildfire-distressed areas, and limit costs passed onto customers.
But due to a 30-day review period, as FOX Business’ Cheryl Casone reported, the legislation did not go into effect by the time five wildfires — the Hurst, Eaton, Woodley, Palisades and Tyler Fires — started burning on Tuesday in Los Angeles County, including the Pacific Palisades and Sylmar neighborhoods of Los Angeles and another near the City of Pasadena.
The fires are zero percent contained, officials told Fox News, while more than 30,000 residents are under mandatory evacuation orders. Gov. Gavin Newsom also declared a state of emergency, warning that the worst of the winds were expected between 10 p.m. Tuesday and 5 a.m. Wednesday.
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"A lot of these residents have not been able to get insurance for their homes [for] wildfire coverage, whether it's renter’s insurance or homeowner's insurance," Casone said on "FOX & Friends First" after referencing high insurance costs due to increased destruction in recent years.
Firefighters run as a brush fire burns in Pacific Palisades, California, on Tuesday. (Getty Images)
"So a lot of these folks, unfortunately, they may not be able to cover their loss, too."
Led by Commissioner Ricardo Lara, the legislation would specifically require insurance companies to write policies for at least 85% of their market share and increase that threshold by 5% each year, create cost caps, establish a standard policy cost and prevent "model shopping."
Of the top 12 insurance companies in California, only five are still writing new policies.
"Californians deserve a reliable insurance market that doesn’t retreat from communities most vulnerable to wildfires and climate change," Commissioner Lara said in a Dec. 30 press release.
"This is a historic moment for California. My Sustainable Insurance Strategy is focused on addressing the challenges we face today and building a resilient insurance market for the future," he continued. "With input from thousands of residents throughout California, this reform balances protecting consumers with the need to strengthen our market against climate risks."
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FOX Business’ Max Gorden reports on the latest news that Allstate is set to raise California home insurance rates by 34% on ‘Varney & Co.’
California’s Department of Insurance also notes that all other states except California allow for costs of reinsurance in coverage rates, and a department-led review in 2023 revealed reinsurance as the top strategy used by companies to expand coverage in high-risk climate areas.
Out of 20 of the most destructive California wildfires, seven have taken place in the last five years, the Department of Forestry and Fire Protection reports. In terms of economic cost, the 2018 Camp Fire marked $10 billion in damage; the Tubbs Fire in 2017 cost $8.7 billion; and the Woolsey Fire in 2018 cost $4.2 billion.