Insurance Update
Commissioner Lara Introduces 2nd Phase of Sustainable Insurance Strategy
As we’ve written previously, Commissioner Lara has recently introduced his Sustainable Insurance Strategy (SIS), which is designed to encourage long-term sustainability in the California insurance market. On February 9th, the first phase of the project was introduced – a wave of proposed regulatory reforms designed to make rate applications clearer and easier for insurance companies up front. According to Commissioner Lara, the aim is “to eliminate confusion, reduce delays, and enhance public participation in the rate-making process.”
On March 14th, the second phase of the SIS was announced – a regulation that would allow catastrophe modeling to be used in setting insurance rates. The current system only allows carriers to consider wildfire risk based on historical wildfire losses. Instead, catastrophe modeling allows carriers to use data regarding other factors such as hazards, vulnerability, loss data, and risk mitigation to more accurately predict a property’s wildfire risk. Most other states allow catastrophe modeling and, according to this article from E&E News, “several insurers have agreed to expand coverage if the state allows them to use catastrophe models to estimate their economic losses from future disasters.”
The Department of Insurance will be hosting a virtual workshop regarding catastrophe modeling and ratemaking on April 23, 2024 at 2pm. This workshop is open to the public and will continue until all commenters have spoken or 5pm, whichever is earlier. You can register for the workshop by clicking the button below.
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