California Candidates Propose State-Run Insurance Solutions

Several candidates in California's upcoming election for insurance commissioner are advocating for increased state involvement to address the state's insurance challenges. Their proposals explore various models of public insurance participation aimed at solving existing issues effectively. One such proposal suggests replacing private insurers entirely with a public insurance entity. Other ideas include a state-managed natural disaster insurance program, state-provided reinsurance to support insurance companies, and public-private partnerships designed to ensure market stability. David Russell, a professor at Cal State Northridge and co-author of a National Association of Insurance Commissioners report, supports greater state participation. He recommends establishing the California Wildfire Authority, which would permit private insurers to provide most coverage while the state manages major wildfire losses. As Russell explained to CalMatters, "The government will end up bailing people out anyway. Why not plan it in advance?" Candidate Jane Kim advocates for a state authority to manage wildfire and flood insurance funded by premiums. Merrit Farren proposes a state-run reinsurance system financed by insurer fees, though not all candidates have fully integrated reinsurance into their platforms yet. The California Earthquake Authority has released a report suggesting increased state roles in catastrophic coverage. It suggests that a state reinsurance system could stabilize markets during major events. This authority, formed after the 1994 Northridge earthquake to address insurance availability issues, operates as a public-private enterprise. Although some critics argue its coverage is inadequate, Russell highlights the structure's untapped potential during major events. While industry leaders like Rex Frazier from the Personal Insurance Federation of California express concerns about the feasibility of state-led solutions due to financial sustainability and taxpayer burden, Farren emphasizes insights from the insurance sector. This includes ideas based on international reinsurance strategies, proposing bond financing for unexpected shortfalls. Consumer advocates such as Jamie Court and Amy Bach are open to state-backed reinsurance to address premium drivers. However, economist Carolyn Kousky notes differences in market dynamics between states like California and Florida, which could impact premium rates. Kim's vision, inspired by New Zealand’s system, focuses on investing revenue streams to reduce fire risks. Meanwhile, candidate Lalo Vargas proposes a more radical transformation where a public insurer replaces major companies, funded by taxing industries contributing to climate change.