California Bill Mandates Insurance for Fire-Safe Homes

A proposed bill in the California State Senate could mandate that insurance companies provide or renew coverage for homes adhering to specific wildfire safety protocols. Senate Bill 1076, introduced by State Senator Sasha Renée Pérez, aims to enhance transparency in the insurance claims process post-wildfires. Dubbed the Insurance Coverage for Fire-Safe Homes Act, this legislation ensures properties with fire-prevention measures remain insurable.

These fire-prevention measures include implementing sprinklers, sealing eaves to prevent ember entry, and establishing "zone zero"—a five-foot perimeter around homes free of combustible materials. Senator Pérez noted that the bill addresses the concerns of wildfire survivors seeking assurance of coverage for rebuilt homes fortified against fire threats.

Should the bill pass, it would authorize State Insurance Commissioner Ricardo Lara to exclude noncompliant carriers from participating in the home and auto markets for five years. This initiative emerges as several large insurers withdraw from the California market due to wildfire risks, leading to increased reliance on the California FAIR Plan. The FAIR Plan, an essential player in ensuring homeowners' continued coverage, reported 670,500 active policies by late 2025, a significant uptick from 2022.

Senator Pérez stressed the importance of insurance availability for newly constructed, fire-resistant homes, asserting that homeowners meeting or exceeding safety standards shouldn't face coverage denials. This bill has support from groups like the Eaton Fire Survivors Network and Consumer Watchdog. Joy Chen of the Eaton Fire Survivors Network highlighted potential impacts on the housing market without necessary coverage for fire-safe homes, while Carmen Balber from Consumer Watchdog urged acknowledging wildfire risk mitigation in underwriting decisions.

This legislative development presents critical considerations for payers and providers operating in high-risk wildfire areas, potentially altering underwriting practices and market participation strategies. The continued involvement of entities like the FAIR Plan in providing coverage influences market dynamics, affecting risk assessment protocols and regulatory compliance requirements in California’s insurance industry.