New regulations were supposed to ensure that homeowners in fire zones would have coverage available. But companies can still avoid serving many high-risk areas, a Times investigation found.

Credit...Loren Elliott for The New York Times

California Promised Insurance Relief, But Delivered Loopholes

New regulations were supposed to ensure that homeowners in fire zones would have coverage available. But companies can still avoid serving many high-risk areas, a Times investigation found.

• Nov. 1, 2025

Even before the devastating wildfires that ravaged Los Angeles this year, companies that insure the ever-growing number of homes perched in California’s fire-prone foothills were threatening to abandon the state, declaring that the risks were becoming unsupportable.

The prospect of uninsurable homes was an existential threat for the state. A collapse in its $446 billion real estate economy would bring California to its knees. Gov. Gavin Newsom’s administration went into crisis negotiations with the insurance industry, and emerged in September 2023, with what was billed as an “historic” compromise, one that would reward insurers with higher rates in exchange for protecting homeowners in neighborhoods that climate change was turning into tinder boxes.

The central promise was that insurers would have to write policies in fire-prone areas at a rate equal to at least 85 percent of their market share across the state. But a New York Times investigation has found that a series of loopholes quietly negotiated by the insurance industry all but eliminated that guarantee.

Vast swaths of the designated areas where insurers must write new policies do not in fact overlap with areas that California’s state fire marshal deems to be the most fire-prone, the investigation found, meaning that insurers can load up on coverage in areas the state considers to be safer and still qualify to charge higher rates.

As a result, insurance companies will be able to raise rates and offload billions of dollars in costs and liabilities to ratepayers while taking on few, if any, new customers in high fire-risk areas.

Sources: “Distressed” areas from the California Department of Insurance; Footprints of residential buildings from FEMA.

The New York Times

And while the regulations were billed as an attempt to get homeowners off the state’s toverburdened last-resort insurance program, FAIR, the number of residential FAIR policies has nearly doubled since the new insurance deal was announced, rising to 625,033 from 320,581, the Times review found.

Some insurers began minimizing their potential losses even before the new regulations were finalized. In the six months after the deal was announced, California’s three largest insurance groups informed the state of their plans to dump nearly 50,000 existing policies, five times the number filed by those companies in the 20 months preceding the deal. And the new regulations will effectively reward them for doing it.

More than a fifth of the nonrenewals — about 11,000 policies in total — were in ZIP codes within or adjacent to areas that would burn in the January fires, the Times analysis found. The vast majority of those were in and around Pacific Palisades, where fire later destroyed more than 6,800 structures.

Maggie Neilson, a 53-year-old philanthropy consultant, had a policy from Foremost on her 2,500-square-foot house in Pacific Palisades until the company elected not to renew it in March 2024.

The only insurer Ms. Neilson could find to replace the policy was the FAIR plan, which charged her about 40 percent more than Foremost had for about 40 percent less coverage. “At the time, the media was saying everyone knows this is a problem and the governor and others are working on it, so I didn’t think too much about it,” she said.

Then in January, her home and all of its contents were destroyed by the Palisades fire. She said her FAIR policy will pay her $1.5 million for a rebuild that she has been told will cost around $3 million.

Proponents of the new rules said they would allow rates to reflect the risks of hotter, drier weather and provide a business case for insurers to offer policies in high-risk areas. Representatives for Farmers Insurance, one of the few companies that agreed to discuss the regulations, praised them as a “return to a more effective rating regime” that “will bring positive change to the California insurance marketplace.”

Ricardo Lara, California’s elected state insurance commissioner who led the drafting of the new rules, said the state was “in crisis mode” when it negotiated the new regulations, with seven of the 12 top insurers in the state halting or restricting the writing of new policies in California.

“You constantly have to strike the balance between, you know, the consumer protections, giving consumers options, and having a robust and thriving insurance market,” Mr. Lara said.

He said the new rules would offer tens of thousands of Californians the chance to purchase protection for their homes that might otherwise have been unavailable at any price.

Confronted with The Times’ findings about ways insurers could shortchange their promises to insure in high-risk areas, Mr. Lara conceded that the rules might not deliver the hoped-for outcomes immediately. Insurers, he said, had “bullied” the state as it drafted the new rules. But he predicted that, as rates rose, competition would eventually push insurers back into writing policies in high-risk zones.

“This is uncharted territory,” he said. “Will this be perfect? Absolutely not.”

No Insurance, No Housing

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Maggie Neilson, who lost her home in Pacific Palisades to fire, walks through her now-empty lot,Credit...Mark Abramson for The New York Times

From the insurance industry’s perspective, the roots of the current crisis can be traced back to 1988. Voters passed an initiative that year that made California one of about a dozen states where homeowners’ insurance rate increases must be preapproved by an elected insurance commissioner. The industry has long complained that the system keeps rates in California artificially low.

By the early spring of 2023, when Governor Newsom began meeting with industry lobbyists, some of California’s largest property insurers had already stopped or curtailed writing new business in the state. State Farm and Farmers, which together comprise one third of the market, started pulling back in May and July of that year.

Existing policies were not affected, but the changes meant that home buyers were left with few options for insuring their new properties other than the FAIR plan, a consortium of all the companies licensed to offer property insurance in the state. FAIR is required by law to sell bare-bones fire policies to people who can’t find coverage in the regular market.Insurers share any profits from FAIR in good times, but must cover all of its losses.

“I think that was the moment when we really started to get nervous,” recalled Ann Patterson, a senior counselor to the governor who was involved in the discussions. “We only have so many more big carriers that can pick up that demand, and if they can’t pick it up, then everybody’s going to end up on the FAIR plan.”

It was generally agreed that FAIR was not a solution. Its lean policies rarely covered the actual cost to rebuild a home, even though they generally cost more than regular policies. Nearly 7 percent of realtors surveyed in 2023 by the California Association of Realtors said that they had deals fall out of escrow that year because buyers couldn’t find adequate, affordable coverage.

It was not a problem just for wealthy homeowners in Brentwood and Malibu. Nearly a third of California’s 40 million residents live in or near highly flammable, brushy or densely forested wildlands.

Insurers made it clear that big, regulatory changes were needed to keep them in the market, addressing rising construction costs as well as climate change.

California requires companies to provide detailed financial information justifying rate-increase requests; if they seek 7 percent or more, the requests can be challenged in public hearings and take up to a year to resolve.

Historically, wildfire losses figured in those calculations, but insurers had to show data on their actual payouts. They wanted California regulators to instead join other states in allowing rates based on climate-change models that estimate future losses.

Seren Taylor, vice president of the Personal Insurance Federation of California, the lead lobbying group for insurers in California, said rate increases will help avert a serious threat to the state’s economy. “You don’t have to care about insurers per se, but you have to care about having a healthy insurance market,” he said. “We had to give insurers the tools they need to have a functional market.”

The 85 Percent Promise

The deal with insurers, as described by Mr. Lara when he announced it, contained an unambiguous promise: If carriers wanted to charge higher rates, they would have to write policies in “fire zones” at a rate “no less” than 85 percent of their statewide market share.

If a carrier’s statewide market share is 20 percent, for example, its share in designated distressed areas would have to be at least 17 percent.

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Ricardo Lara, who is now the California Insurance CommissionerCredit...Valerie Chiang for The New York Times

To reach the 85 percent standard, insurers can offer policies to homeowners currently on the FAIR plan, though nothing requires them to do that. Or they can write policies anywhere in a list of 662 distressed ZIP codes.

Some of those ZIP codes neatly overlap the state’s high-fire-risk zone maps, like the one covering Topanga, a town known for its hippie scene. Topanga sits in a steep, rugged canyon in the Santa Monica Mountains that can become a wind tunnel, where embers can be blown for miles.

But the Times analysis found that many “distressed” ZIP codes extend well beyond the riskiest fire zones. The 90063 area, for instance, is in the dense heart of urban East Los Angeles, with only a small sliver overlapping areas deemed at high risk of a blaze — and that sliver has no homes in it at all.

Sources: California Department of Insurance, CalFIRE, FEMA.

Note: Includes “high” or “very high” fire hazard zones. Residential buildings, shown in dark gray, include single-family, multi-family and manufactured homes. Non-residential buildings are shown outlined in light gray.

The New York Times

And half of California’s 58 counties qualify under the regulations as “distressed” in their entirety, even though only a minority of the single-family homes located within them are in high or very high fire risk zones. In Ventura County, which sprawls from urban strip malls and moist strawberry fields to forested peaks, more than 100,000 homes, or roughly 60 percent of the county’s single-family structures, are clustered in areas with lower wildfire risk. Yet insuring any of them would help a company meet the 85 percent target.

Placer County, just north of Sacramento, stretches east from suburbs dominated by new subdivisions with few mature trees into the pine-covered slopes of the Sierra Nevada mountains, where rugged terrain and dense vegetation create a higher fire danger.

Policies written anywhere in the county count toward the requirement.

But a savvy insurer could meet it by zeroing in on Roseville, a city of about 160,000 residents whose boundaries barely graze the high-risk zones — in fact, one of its three main ZIP codes falls entirely outside the zones.

Sources: California Department of Insurance, CalFIRE, FEMA.

Note: Analysis of homes inside of “high” or “highest” fire hazard severity zones based on FEMA single-family or multi-family residential buildings.

The New York Times

In more than 100 of the state’s distressed ZIP codes, fewer than a third of single-family homes are in high-fire-risk zones, the Times analysis found. In more than 70 of the ZIP codes, less than 10 percent of homes are in those zones.

Mr. Lara’s deputy commissioner, Mike Peterson, acknowledged in an interview that insurers will probably gravitate toward those lower-risk homes. But he predicted that those opportunities “will be sucked up very quickly, which will force everybody into the more-fire-risk areas.”

Insurers who cannot or choose not to meet the 85-percent requirement can still qualify for the new rate increases. A pair of what industry lobbyists called “offramps” were negotiated as alternatives to the 85 percent rule. Insurers can claim hardship and petition the commissioner for a waiver; or they can take advantage of an option, originally intended just for small companies, that requires only that they increase the number of policies they have in the designated distressed zones by 5 percent over the previous year.

“We decided to include the 5 percent option in order to give all companies a way to incrementally get to the 85 percent target in a way that is sustainable and doesn’t put their solvency at risk,” said Michael Soller, Mr. Lara’s spokesman.

But the way the provision was written meant that insurers that had spent much of 2024 dumping customers by the tens of thousands would, at least initially, be able to meet an even lower bar.

‘We Were Being Bullied’

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Fires burned in a neighborhood not far from downtown Pacific Palisades.Credit...Mark Abramson for The New York Times

Eight days after the deal was announced in September 2023, Foremost Insurance reported that it had already begun to drop policies in fire-prone areas across the state.

Over the following five months, as Mr. Lara’s office was writing the regulations, three insurers followed suit: Farmers Insurance, CSAA and State Farm.

These companies told Mr. Lara that they would be dropping more than 50,000 policies in more than 800 ZIP codes, heavily concentrated in the most fire-prone areas of the state.

This was a different thing entirely than declining to write policies for new customers. It meant that even people whose homes met underwriting standards and who had paid their premiums on time weren’t safe.

Besides Pacific Palisades and other Los Angeles County communities like Calabasas and Brentwood, some of the hardest-hit neighborhoods were in Contra Costa, Santa Cruz and Santa Clara counties, the Times review found. In one ZIP code in Los Gatos, a forested town pressed up against the foothills of the Santa Cruz mountains, State Farm indicated that it would dump two out of three of its customers, and Farmers said it would dump half.

Yvette Curran got her nonrenewal notice from Farmers n January 2024. Effective in April, the company would no longer insure her home in the hills north of Santa Cruz. She had been a loyal customer for 12 years.

“What do you do?” she said. “There’s no nobody else to insure you.”

Similar stories were unfolding across the state. In Lake County in Northern California, where more than 2,000 homes and 65 percent of the land area has burned in a series of devastating fires over the last decade, Foremost dropped the vast majority of its customers; Farmers also issued nonrenewal notices there, but was more selective.

“I can’t go to the grocery store or walk into a coffee shop or go to a Rotary meeting where there isn’t a couple or three folks who have a horrific story about being nonrenewed,” said Mike McGuire, the California State Senate leader, who represents Lake County.

Rex Frazier, president of the Personal Insurance Federation of California, said the nonrenewals occurred at a time when insurers were not yet certain of what the final rules would be, and “needed to respond to their mounting financial problems.”

But Governor Newsom was frustrated, aides said. Insurers had issued nonrenewals in large numbers before, but this wave came after the industry and the state had struck their deal.

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Gov. Gavin Newsom of CaliforniaCredit...Andri Tambunan for The New York Times

Mr. Lara said in an interview that he was angry, too. “I was livid, and yes, I did feel like we were being bullied,” he said. But whatever he felt privately, he said little in public, telling The Times that he felt it would be counterproductive to berate the very companies he was trying to woo back.

Yet the state effectively rewarded their behavior by grandfathering in the nonrenewals when it finalized the regulations. Companies like State Farm and Foremost that had dumped more than 5 percent of their customers in fire zones could now add back that 5 percent — perhaps in a lower-risk part of a ZIP code — and still qualify to charge the new higher rates.

By the time the department put the finishing touches on the regulatory package in December 2024, the state had offered two additional carrots to the industry. One was a cap on the amount of wildfire-related losses that insurance companies comprising the FAIR plan previously had to shoulder. Now, anything above $500 million would have to be borne by residential policyholders across the state. The other was to let insurers factor into their rate calculations the cost of reinsurance, which they buy to hedge the risk of an expensive catastrophe.

Consumer Watchdog, an advocacy group that by law represents California policy holders in rate hearings, estimated that the reinsurance provision alone could raise premiums by an additional 40 percent.

Fallout from the Fire

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Maggie Neilson near the ruins of her home in Pacific PalisadesCredit...Mark Abramson for The New York Times

Eight days after state officials put the final piece of the new regulations into place, wildfires swept through Los Angeles.

In their aftermath, Mr. Lara imposed a 1-year moratorium on nonrenewals, but only in the fire-affected areas. It will expire in January 2026.

Insurers already have applied to charge their residential customers $425 million in losses incurred by the FAIR plan in the January fires, based on the new pass-through approved by Mr. Lara. Consumer Watchdog has filed a lawsuit challenging those assessments.

The incentive to shed customers in risky areas remains in place for insurers that have yet to file for rate increases under the new system.

So far, five companies — serving 20 percent of the California market —- have filed for increases. Mr. Lara said that is a promising sign that the new incentives are luring insurers back.

But the total number of policies they say they will add in distressed areas — 2,500 — is not really a net gain, because it does not take into account the number of policies that some of those same companies dropped since the deal was announced.

Those companies now stand to collect nearly $250 million in additional premiums. Each filed for rate increases just under the 7 percent threshold that would trigger the requirement for public hearings, and could seek additional increases later.

People living in hazardous fire zones will probably see rate hikes much larger, since the rate filing is an average, Mr. Lara’s spokesman said.

Meanwhile, the number of homeowners resorting to the FAIR plan has not gone down, as hoped, but doubled. Operators of the plan last month asked for a rate increase of nearly 36 percent. Nor have home buyers found it any easier to obtain insurance. The percentage of realtors reporting that they had deals fall through for lack of insurance has more than doubled since 2023, to 16.6 percent.

The trends so far suggest that the regulatory package will do little to help homeowners get the coverage they need, said Jamie Court, Consumer Watchdog’s president.

“This isn’t the balanced deal the insurance commissioner sold to Californians,” he said. “It’s a giant giveaway to insurers.”

Mr. Lara said state officials will not know if the overhaul worked for another year, at least.

In the meantime, he said, he was grateful for the Times analysis, and had asked his staff to be on the lookout for the issues it raised. He said the state would make adjustments if needed.

“There’s no guarantees,” he said. “But our current system doesn’t have guarantees, either.”

Methodology

For this investigation, The New York Times obtained and analyzed a range of data sources.

California’s Department of Insurance publishes a list of ZIP codes and counties that meet the new insurance regulations’ definition of “distressed.” The Times cross-referenced those designations with the state’s fire hazard maps (focusing, as the regulations do, on “high” and “very high” risk zones), as well as a Federal Emergency Management Agency data set of building outlines. This allowed reporters to compare the number of homes inside those hazard zones versus outside of them. The Times used ZIP code boundaries published by the state’s Department of Technology, ultimately based on boundaries sourced from TomTom, and excluded ZIP codes containing fewer than 100 single-family home structures from those analyses.

To obtain data on thousands of policies that were canceled by insurers, known as “block nonrenewals” in industry parlance, The Times examined regulatory filings submitted by insurers. (That information is not otherwise readily available because the Department of Insurance does not publish statistics on block nonrenewals.) The Times focused on filings by companies in California’s three largest homeowners insurance groups, measured by total “direct premiums written” in 2023: State Farm Group, Farmers Insurance Group (which also owns Foremost Insurance), and CSAA. These filings indicate the number nonrenewals being undertaken or planned in each California ZIP code. Because insurers do not indicate the specific date any given nonrenewal was planned, The Times analyses focused on the dates insurers submitted the relevant filing exhibits.

Nicholas Bogel-Burroughs contributed reporting.

Jo Becker is a reporter in the investigative unit at The Times.

Jeremy Singer-Vine is a data editor at The Times, leading a team of journalists who combine programming, data analysis and traditional reporting skills.

Katie Benner is a correspondent writing primarily about large institutions that shape American life.

Laurel Rosenhall is a Sacramento-based reporter covering California politics and government for The Times.

Mira Rojanasakul is a Times reporter who uses data and graphics to cover climate and the environment.

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