California homeowners are facing a tough insurance market, pushing many to look beyond traditional options. One clear sign is the sharp rise in surplus lines homeowners insurance, a market that offers coverage when standard policies are hard to find or too costly. In the first half of 2025, surplus lines insurance transactions jumped 119% compared to the same period last year, reaching over 171,000 deals, according to the Surplus Line Association of California.
This surge follows a broad pullback by admitted carriers from California’s market. Benjamin J. McKay, CEO of the Surplus Line Association, notes that as big insurers pull back, surplus lines coverage has become more popular, especially in rural and wildfire-prone areas. Interestingly, average premiums in this market have dropped by 25% compared to 2024, suggesting companies are now offering policies for lower-value homes often in higher-risk zones.
Brokers like Lacey Garrison Strom from Heffernan Insurance Brokers have seen more clients turn to surplus lines for affordable solutions. She pointed out that some large insurers are offering non-admitted policies, which give them flexibility to adjust coverage and pricing. This flexibility can help homeowners find coverage that fits their needs without necessarily paying more.
Steve Rivera of Liberty Company Brokers in Los Angeles said insurers are now very picky, only accepting the best risks. They require homeowners to take serious steps like clearing brush, installing ember-resistant vents, and maintaining defensible space around their homes. One of his clients, with a $10 million home in a fire-prone canyon, has spent over $250,000 upgrading the property to meet requirements, and more investments are underway before final insurance approval is granted.
On the other side, admitted insurers are limiting how many new policies they take. Rivera says agencies only get "four or five policies a month" to write, and insurers demand clean records and multiple types of coverage bundled together, like home, auto, and umbrella insurance.
The insurance challenges stem from years of devastating wildfires in California. The recent Los Angeles wildfires alone destroyed over 16,000 buildings and caused roughly $30 to $35 billion in insured losses. State Farm, which covers about one in five California homeowners, paid out nearly $4 billion in claims. This caused the company to request large rate hikes, which, if approved, could add over $1,000 per year to the average homeowner’s premium in 2026.
Regulators are trying to respond by allowing insurers to use catastrophe models for pricing instead of just historical data. They’ve also made changes to streamline rate approvals and increased coverage limits in the California FAIR Plan, the insurer of last resort for properties that can’t get coverage elsewhere. But some consumer groups fear these changes will lead to higher costs and are challenging them in court.
Commercial property owners in wildfire areas face similar struggles. Brokers like Mike Prindle of CAC Specialty are turning to alternative insurance products, such as parametric insurance and catastrophe bonds, especially for clients with smaller or mid-sized risks that traditional insurers avoid. The FAIR Plan has also stepped up with higher commercial property limits, but affordable coverage remains hard to find.
Despite these obstacles, some brokers are hopeful. Rivera believes the market might be improving, noting recent interest from companies wanting to expand high-net-worth insurance offerings in California.
The situation shows no easy fixes. As wildfires keep shaping the risks, and carriers stay cautious, homeowners and businesses may have to keep exploring alternative insurance paths for the foreseeable future.