Mercury Insurance has taken a new step in California’s ongoing battle with wildfire risks by submitting a rate filing that uses the state’s fresh regulation allowing catastrophe models to influence insurance pricing. This move is the first to apply the Verisk Wildfire catastrophe model, a tool designed to predict the impact of future wildfires. The model recently cleared a review process by the California Department of Insurance, which also approved another model, the KCC US Wildfire Reference Model Version 3.0, making it the state’s second wildfire catastrophe model.
The Verisk model’s approval marks an important moment for California, where wildfires have caused severe damage in recent years. The filing from Mercury calls for a nearly 7% rise in average home insurance rates, reflecting higher costs driven by inflation and wildfire exposure. However, not all policyholders will see the same change—those living in areas with greater fire risk may face bigger increases, while people in safer zones might even see rates go down.
Mercury also plans to encourage homeowners to reduce wildfire dangers by expanding discounts for those who clear brush, improve vents, or use fire-resistant materials.
This comes as California struggles with a homeowners insurance crisis. Wildfires in recent seasons, including devastating blazes in Los Angeles last year that destroyed over 16,000 buildings and caused billions in insured losses, have forced many insurers to pull back or hike prices sharply. The California FAIR Plan and surplus line markets are seeing more business as traditional insurers retreat—the latter saw a 119% jump in transactions in the first half of 2025 alone.
Major insurers like State Farm, Allstate, Farmers, and Mercury have all faced heavy wildfire-related claims. State Farm alone has paid billions and requested substantial rate increases to recover losses. If these hikes go through, State Farm customers could pay around $1,000 more per year by 2026 compared to 2023.
Catastrophe modeling is now allowed for setting insurance rates in all U.S. states. The Verisk Wildfire Model is already used in Nevada, and the KCC model has been accepted in 24 other states, incorporating climate change impacts and encouraging wildfire risk reduction at both property and community levels.
Under the new California rules, insurers that use these models must agree to write more policies in wildfire-prone areas instead of pulling back. Mercury’s filing could allow the company to expand in these higher-risk regions, helping fill some of the gaps left by carriers that have pulled out.
These changes reflect the ongoing challenges California faces with wildfires, housing, and insurance costs. While rate hikes are tough for homeowners, the use of wildfire models aims to encourage safer building practices and more accurate pricing that matches risk, with hopes of stabilizing the market over time.