The scramble to fix California’s home insurance mess failed. Here’s what will happen next

The remains of a home smolders during the Caldor fire in Twin Bridges, Calif., on Sept. 1, 2021. Since the beginning of the year, companies representing more than half of California’s $12-billion home insurance market have stopped or limited new policies, citing ballooning costs and risks. Since the beginning of the year, companies representing more than half of California’s $12-billion home insurance market have stopped or limited new policies. The rumblings of a legislative response to the state’s deteriorating market for new home insurance began in August, when state Sen. Susan Rubio, chair of the Senate Insurance Committee, told Politico that “we are in a crisis and something needs to be done.” A few days later, the Republican caucus in the state Senate released a public letter calling on the insurance commissioner to change the existing regulatory system. Despite the backlog, he said, the Department of Insurance has not significantly sped up its operations, and “if anything, the backlog has slowed them down.” Insurers have been able to adjust for inflation to some degree by increasing customers’ coverage to match the new cost of repairing or replacing their homes, but that has led to a rapid rise in the total amount of liabilities — all those higher-dollar potential losses — on their books, increasing their total risk exposure without significantly increasing the amount of backup capital they have on hand.