The California Department of Insurance (CDI) has given the green light to the state’s first wildfire catastrophe model, signaling a big change in how property insurance rates will be set. Developed by Verisk’s Extreme Event Solutions, this new tool helps insurers assess wildfire risks more accurately as part of California’s effort to fix its growing homeowners insurance problems.
Wildfires have hit California hard in recent years. Seven of the state’s 10 worst fires happened in just the last decade, pushing many insurance companies to pull back or raise rates sharply. The 2025 wildfires in Los Angeles only made things worse, destroying over 16,000 buildings and causing insured losses estimated between $30 billion and $35 billion. Big insurers like State Farm, Allstate, Farmers, and Mercury have paid out billions in claims, with State Farm alone reporting nearly $4 billion in losses and over 12,000 claims linked to the fires.
Rising rates and fewer insurers willing to write new policies have forced many homeowners into the state’s last-resort program, the California FAIR Plan, or into surplus lines, which have increased by 119% in the first half of 2025 compared to last year. This has left many homeowners struggling to find affordable coverage.
The new wildfire model aims to change that. It was reviewed under CDI’s Pre-Application Required Information Determination (PRID) process, part of Commissioner Ricardo Lara’s plan to make insurance more sustainable in California. Insurers can now use this model to help set rates, but there’s a catch—they have to agree to write more policies in wildfire-prone areas.
“This closes one of the biggest coverage gaps across the state,” said Lara. “Before, insurers raised rates without promising to provide coverage. That stops now.”
State Farm, which covers about one in five California homeowners, recently asked for bigger rate increases, partly because of its wildfire losses. The company got approval for a 17% hike after an earlier request was partly denied. Activist groups warn that further increases could mean an average homeowner pays over $1,000 more annually by 2026 compared to 2023.
While catastrophe models like Verisk’s are commonly used across the U.S. and have already been approved in Nevada, some consumer advocates oppose their use in setting rates. They worry it could push prices even higher for homeowners.
Still, the CDI will start accepting rate applications from insurers using this new model, as long as they commit to keeping more policies in California’s wildfire risk zones. The department is also reviewing wildfire models from other companies, including Karen Clark and Company and Moody’s.
For now, Californians can expect big changes in how insurance companies price wildfire risk and which homes get coverage. The hope is that this new approach will bring more fairness and stability to a market that has been shaken by devastating fires and rising costs.