California's homeowners insurance market in May 2026 sits on a knife's edge between reform and recovery. The Sustainable Insurance Strategy (SIS) took effect in January 2025 just days before the Palisades and Eaton fires destroyed more than 16,000 structures, and now, sixteen months later, carriers are filing rates under the new rules while the FAIR Plan absorbs $4 billion in losses and pursues its largest rate increase in seven years.
For homeowners shopping for coverage right now, the practical landscape is shifting week by week. This roundup tracks the verified facts, regulatory milestones, and carrier moves through May 15, 2026, with sources cited inline. For a structural overview of how the California market works, see our California homeowners insurance pillar.
Key Takeaways
- On January 7, 2025, the Palisades and Eaton fires triggered a moratorium covering 35+ ZIP codes; Verisk estimates combined insured losses of $28-$35 billion (Verisk).
- In February 2025, the California FAIR Plan levied a $1 billion special assessment on member insurers, the first since 1994, half of which carriers may recoup from policyholders (CalMatters).
- The Sustainable Insurance Strategy, announced September 2023, took full effect in January 2025 and requires participating carriers to write at least 85% of their statewide market share in wildfire-distressed areas.
- Mercury Insurance and CSAA were the first carriers to receive SIS rate approvals at 6.9% each, with Mercury committing to 38,000+ new policies and CSAA preparing to depopulate the FAIR Plan (CDI).
- State Farm General received emergency interim rate hikes of 17% on homeowners and 32.8% on rental dwelling under a March 2026 settlement (CDI).
- Travelers announced on April 24, 2026 it would expand California homeowners coverage under the SIS, the first major new commitment from a top-10 carrier since the fires (Insurance Journal).
- The FAIR Plan has filed for a 35.8% rate increase effective April 1, 2026, pending CDI approval (Stateline).
The 2026 Market State in One Paragraph
California's homeowners insurance market in 2026 is defined by three simultaneous pressures: post-fire loss absorption, regulatory turnover, and slow carrier re-entry. The Palisades and Eaton fires erased roughly $30 billion in insured value and forced the FAIR Plan to draw a $1 billion assessment from member insurers. Commissioner Ricardo Lara's Sustainable Insurance Strategy, finalized in late 2024 and operative throughout 2025, now permits insurers to use forward-looking catastrophe models and the net cost of reinsurance in rate filings, provided they commit to writing 85% of their statewide market share in wildfire-distressed ZIP codes. Mercury, CSAA, and Travelers have publicly filed or announced under the framework. State Farm General continues to operate under emergency rates approved in May 2025. The FAIR Plan, with more than 600,000 policies and roughly $650 billion in exposure, has requested a 35.8% rate hike that, if approved, would take effect April 1, 2026 (A.M. Best).
The Sustainable Insurance Strategy Timeline
The Sustainable Insurance Strategy is the most extensive overhaul of California's insurance regulations since Proposition 103 passed in 1988.
September 2023: Announcement
Commissioner Lara unveiled the SIS in September 2023 as a package of regulatory changes designed to coax carriers back into California by allowing them to price for forward-looking wildfire risk in exchange for binding commitments to write in distressed areas (CDI).
2024: Regulatory Build-Out
Throughout 2024, the CDI moved three core regulations through public comment:
- 1.Catastrophe modeling regulation: Permits insurers to use Department-reviewed forward-looking wildfire catastrophe models in rate filings, replacing the prior 20-year historical average requirement.
- 2.Net cost of reinsurance regulation: Adopted in December 2024, allows insurers to incorporate California-specific reinsurance costs in ratemaking if they expand coverage in high-risk areas (CDI).
- 3.Rate filing review reforms: Streamlined the review process and added the intervenor reform package, which Commissioner Lara further updated in 2025 and 2026 (CDI).
January 2025: Implementation
The SIS took full effect on January 1, 2025, days before the Palisades fire ignited. The Department began accepting rate applications using the Verisk Wildfire Model in 2025, with the Moody's RMS and KCC models reviewed shortly thereafter.
The 20% / 85% Market Share Rule
Participating insurers must write at least 85% of their statewide market share in ZIP codes the CDI has identified as "undermarketed" and high-risk. The CDI defines undermarketed ZIPs as those where more than 15% of policies are written by the FAIR Plan, plus low-income high-premium ZIPs where premiums exceed $4 per $1,000 of coverage. The 20% threshold refers to county-level identification: counties where more than 20% of homes carry high aggregate fire risk scores qualify for the distressed area designation (CalMatters).
If a carrier writes 20 out of 100 homes statewide, it must write at least 17 out of 100 homes in any distressed area where it participates under the SIS.
January 7, 2025: The Palisades and Eaton Fires
The Palisades fire ignited the morning of January 7, 2025, in Pacific Palisades. The Eaton fire ignited the same evening in Altadena. By the time both were contained on January 31, the combined burn area exceeded 37,000 acres and more than 16,000 structures were destroyed. Thirty people died (Insurance Journal).
Insured Loss Estimates
Industry catastrophe modelers placed combined insured losses in a wide band:
- Verisk: $28-$35 billion ($20-$25B Palisades, $8-$10B Eaton) (Verisk)
- KCC: approximately $28 billion (Insurance Journal)
- Moody's RMS: $20-$30 billion (Moody's)
- Milliman: $25.2-$39.4 billion (Milliman)
Most loss is residential. The Palisades fire alone is the costliest individual wildfire in U.S. history by insured loss.
SB 824 Moratorium Application
Senate Bill 824, which then-state-senator Lara authored in 2018, requires a mandatory one-year moratorium on non-renewals and cancellations for residential policies within or adjacent to a fire perimeter following a gubernatorial state of emergency declaration. Governor Newsom issued his declaration on January 7, 2025.
Commissioner Lara's Bulletin 2025-1, amended January 17, 2025, applied the moratorium to ZIP codes within or adjoining the perimeters of the Palisades, Eaton, Hurst, Lidia, Sunset, and Woodley fires (CDI Bulletin 2025-1).
Palisades fire ZIPs: 90049, 90265, 90272, 90290, 90402, 91301, 91302, 91320, 91356, 91361, 91364, 91436.
Eaton fire ZIPs: 91001, 91006, 91007, 91011, 91016, 91020, 91024, 91042, 91101, 91103, 91104, 91106, 91107, 91108, 91206, 91208, 91214, 91706, 91731, 91732, 91775, 91780, 93563.
The moratorium ran through January 7, 2026 for residents in those ZIP codes regardless of whether they suffered a direct loss.
Commissioner's Emergency Orders
Commissioner Lara issued a series of bulletins through January and February 2025 covering claims handling, advance payments, additional living expenses, and FAIR Plan loss adjustment. Notably, in mid-January 2025, the Commissioner asked State Farm to pause its planned non-renewal actions in Los Angeles County; State Farm complied for affected ZIPs (Carrier Management).
For homeowners whose carriers issued non-renewal notices outside the moratorium ZIPs, our guide to California non-renewal options walks through next steps.
FAIR Plan Financial Pressure After the Fires
The California FAIR Plan, the state's insurer of last resort, entered 2025 with approximately $600 billion in exposure and more than 550,000 policies in force, having grown its policy count by roughly 40% during 2024 and its exposure by roughly 60% (A.M. Best).
The $1 Billion Special Assessment
In February 2025, the FAIR Plan reported approximately $4 billion in losses from the January fires and invoked its assessment authority. Commissioner Lara approved a $1 billion special assessment on member insurers, the first such assessment since the 1994 Northridge earthquake (CalMatters).
Under Bulletin 2025-4, member insurers may recoup up to 50% of their assessment share from policyholders as a temporary surcharge (CDI Bulletin 2025-4). After the assessment cleared, the FAIR Plan's estimated cash position fell to under $400 million by July 2025, just as the 2025 wildfire season opened.
Commercial High-Value Capacity Expansion
In July 2024, the CDI approved a new FAIR Plan commercial coverage tier with limits up to $20 million per building and $100 million per location. The new Commercial High Value (CHV) policies became available on or about July 26, 2025, and the program is scheduled to sunset on December 31, 2028, with policies issued before that date continuing for one additional year (CDI Alert).
The residential FAIR Plan dwelling limit remains $3 million per structure, which is why most high-end Pacific Palisades and Malibu owners pair the FAIR Plan with a difference-in-conditions wrap. See our breakdown of the DIC wrap for how this stack works.
The FAIR Plan's 35.8% Rate Filing
On September 29, 2025, the FAIR Plan filed for a 35.8% rate increase effective April 1, 2026, the largest rate hike it has requested in seven years. The increase would affect roughly four in five of its policyholders, though the redistribution is sharp: approximately half of policyholders would see increases between 40% and 55%, some would see decreases of up to 78%, and others could face increases exceeding 300% (Stateline).
As of May 15, 2026, the filing remained under CDI review. Historically, Commissioner Lara has approved smaller increases than the FAIR Plan has requested; both the 2021 and 2023 filings averaged around 16% after CDI trimming.
For homeowners considering whether to stay on the FAIR Plan or seek voluntary-market coverage, our guide to FAIR Plan alternatives compares the options.
Major Carrier News: 2024-2026
State Farm General
March 20, 2024: State Farm General announced it would non-renew roughly 30,000 homeowners, rental dwelling, and other property policies, plus withdraw from offering commercial apartment policies (an additional 42,000 policies). The non-renewals began rolling on July 3, 2024 (Insurance Journal).
June 2024: State Farm General filed for a standard rate increase. By early 2025 the carrier's financial condition had deteriorated further.
February 2025: State Farm General filed for emergency interim rates of 22% on homeowners, 15% on tenants and condo, and 38% on rental dwelling, citing fire losses and capital pressure (State Farm).
May 14, 2025: Commissioner Lara adopted the administrative law judge's recommended ruling granting emergency interim rates of approximately 17% on homeowners. The approval was conditioned on State Farm General receiving a $400 million capital infusion from its parent, State Farm Mutual (CDI). The emergency rate took effect June 1, 2025.
March 9, 2026: A settlement among the CDI, Consumer Watchdog, and State Farm finalized the homeowners interim rate at +17.0% (no further increase to policyholders beyond the emergency rate) and reduced the rental dwelling interim rate from +38% to +32.8%, with a refund to affected rental dwelling customers including 10% interest back to June 1, 2025 (CDI).
Mercury Insurance
August 15, 2025: Mercury Insurance submitted California's first homeowners rate filing under the Sustainable Insurance Strategy, seeking a 6.9% average increase (Mercury).
December 2025: The CDI approved Mercury's 6.9% increase, effective July 2026 for more than 650,000 homeowners. Mercury committed to writing 38,000+ new policies long-term, with 6,000+ new policies over the first two years, particularly in wildfire-distressed areas and through FAIR Plan depopulation (CDI).
CSAA Insurance Group
In August 2025, CSAA filed a 6.9% homeowners rate increase under the SIS. The filing was approved in late 2025. CSAA simultaneously announced it would offer quotes to qualifying AAA members in Northern California who currently hold FAIR Plan policies, beginning a sustained FAIR Plan depopulation effort. CSAA also rolled out a "My Home Hardening" discount of up to 12.5% and a guarantee to renew policies for at least three years for homeowners earning the IBHS Wildfire Prepared Home designation (CSAA).
Allstate
Allstate paused new homeowners business in California in late 2022. Throughout 2024 and 2025, the carrier signaled it would re-enter once catastrophe modeling and net cost of reinsurance were both available in rate filings. As of May 2026, Allstate has signaled SIS filing intent but has not yet publicly confirmed a filed and approved SIS rate, though it remains in the announced cohort of returning carriers alongside Mercury and CSAA (Reinsurance News).
Travelers
April 24, 2026: Travelers announced voluntary participation in the Sustainable Insurance Strategy and notified the CDI of its intent to expand California homeowners insurance availability. The announcement is the first new commitment from a top-10 national carrier since the Palisades and Eaton fires. Travelers also expanded discounts for ember-resistant vents, Class A roofing, and defensible space mitigation (Insurance Journal, Travelers).
For homeowners with properties above the FAIR Plan dwelling limit or in non-admitted territory, our overview of high-value home insurance covers the surplus-lines and DIC layering options.
Legislative Activity 2025-2026
Nine Lara-sponsored bills took effect January 1, 2026 (CDI):
- California Safe Homes Act (AB 888): Grant program for fire-safe roofs and mitigation.
- Insurance and Wildfire Safety Act (AB 1): Requires CDI to review and update wildfire safety regulations and mitigation discount frameworks.
- Business Insurance Protection Act (SB 547): Extends post-fire non-renewal protections to small businesses, HOAs, condominium associations, affordable housing units, and nonprofits.
Four major bills remain pending in the 2026 legislative session as of mid-May (CalMatters):
- Disaster Recovery Reform Act (SB 876): Would require insurer disaster recovery plans, double penalties during emergencies for fair-claims-practices violations, expand additional living expenses by 100% during declared disasters, and require mandatory offers of extended/guaranteed replacement cost coverage.
- Insurance Coverage for Fire-Safe Homes Act (SB 1076): Would require insurers to offer and renew coverage to any homeowner meeting CDI wildfire safety standards, with a five-year market bar as penalty for serious non-compliance.
- Non-renewal Protections (SB 1301): Would require six months advance notice before non-renewal, mandate documented reasons with cure opportunity, and prohibit non-renewal triggered by mere claim inquiries.
- Make It FAIR Act (AB 1680): Would overhaul the FAIR Plan's claims handling, coverage options, and transparency, based on the CDI's 2025 Report of Examination findings.
On April 14, 2026, a coalition of 40 organizations sent a joint letter to the Senate Insurance Committee urging passage of all four bills before the April 22, 2026 committee deadline (Live Insurance News).
How Reinsurance Flows Through to Homeowners
Reinsurance is insurance for insurers. After the Palisades and Eaton fires, several California carriers exhausted significant portions of their reinsurance towers; Mercury General notably reported that the January 2025 fires fully exhausted its primary reinsurance layer, which contributed to a profit swing later in the year as reinsurance recoveries flowed in (Insurance Business).
Until December 2024, California was the only state that did not allow primary insurers to include reinsurance costs in their rate base. The Net Cost of Reinsurance regulation now permits a California-specific reinsurance cost component, conditioned on the carrier writing 85% of statewide market share in distressed areas. The practical result for homeowners: rates will reflect the actual cost of transferring catastrophe risk, which is higher in 2026 than in any year since 2017 due to global reinsurance market hardening.
For homeowners, this means voluntary-market premiums will be priced closer to the underlying risk going forward. The trade-off is that more carriers should be willing to write in fire-prone ZIPs that the FAIR Plan currently dominates.
What This Means for California Homeowners Shopping Today
The market is choppy but more navigable than it was twelve months ago. As of May 2026:
- 1.If you are in a moratorium ZIP that expired January 7, 2026: Re-shop now. SIS-filed carriers (Mercury, CSAA, eventually Allstate and Travelers) are the most likely to take new applications in your area.
- 2.If you are on the FAIR Plan: Watch for the 35.8% rate filing decision. If approved, your FAIR Plan premium could change materially on April 1, 2026 or shortly after. Compare voluntary-market quotes annually; CSAA's Northern California depopulation push has already moved AAA members off the FAIR Plan at favorable terms.
- 3.If you have a State Farm General policy: Expect the 17% interim rate to persist through the full rate case. Rental dwelling owners should confirm refund mechanics from the March 2026 settlement.
- 4.If your dwelling value exceeds $3 million: The FAIR Plan residential limit will not be enough on its own. A DIC wrap remains the standard structure for high-value Pacific Palisades, Malibu, Hidden Hills, and Bay Area properties.
- 5.If you have a wildfire-hardened home: CSAA's 12.5% My Home Hardening discount and Travelers' expanded mitigation discounts are both new in 2026. Confirm your IBHS Wildfire Prepared Home eligibility before your next renewal.
Frequently Asked Questions
Is the California homeowners insurance moratorium still in effect for the Palisades and Eaton fires?
The mandatory one-year SB 824 moratorium ran from January 7, 2025 to January 7, 2026. As of May 2026, the moratorium has expired in those ZIP codes, meaning insurers may again issue non-renewals subject to standard notice requirements. Several follow-on bills (SB 1301) propose extending notice requirements going forward.
What was the FAIR Plan special assessment, and will I see it on my bill?
In February 2025, the FAIR Plan levied a $1 billion assessment on member insurers to cover Palisades and Eaton fire losses. Under CDI Bulletin 2025-4, insurers may recoup up to 50% of their share from policyholders via a temporary surcharge that appears on renewal bills. Whether you see it depends on your carrier; surcharges are typically itemized.
Are State Farm and Allstate writing new homeowners policies in California in 2026?
State Farm General is not actively writing new homeowners business in most of California and continues to operate under the May 2025 emergency interim rate as adjusted by the March 2026 settlement. Allstate paused new homeowners business in late 2022 and has signaled intent to re-enter under the Sustainable Insurance Strategy but had not confirmed an active filed-and-approved SIS rate as of May 15, 2026.
How does the Sustainable Insurance Strategy affect my premium?
The SIS allows participating insurers to use forward-looking catastrophe models and California-specific reinsurance costs in their rates. In the short term, premiums in fire-prone areas are expected to rise to reflect the actual cost of risk. In exchange, carriers must write at least 85% of their statewide market share in CDI-identified distressed ZIPs, which should increase voluntary-market availability over time.
What is the FAIR Plan's 35.8% rate filing, and when would it take effect?
The FAIR Plan filed for a 35.8% average rate increase on September 29, 2025, requesting an effective date of April 1, 2026. The CDI was still reviewing the filing as of May 15, 2026. Historically, the CDI has approved smaller increases than requested; past filings averaged around 16% after review.
Which California ZIP codes are designated as wildfire-distressed under the SIS?
The CDI maintains the list and updates it as conditions change. Distressed ZIPs are those where more than 15% of policies are written by the FAIR Plan, plus low-income high-premium ZIPs. The state has also identified counties where more than 20% of homes carry high aggregate fire risk scores. Check the CDI's interactive map for your specific ZIP.
Does the SIS apply to surplus-lines or non-admitted carriers?
No. The SIS regulations apply to admitted-market carriers seeking to use catastrophe modeling and net cost of reinsurance in rate filings. Non-admitted (surplus-lines) carriers price freely and are not bound by the 85% market share commitment. For high-value or higher-risk properties, non-admitted markets remain a relevant option.
How Latent Insurance Services Helps
Latent Insurance Services is an independent California brokerage (NPN #20972791) that places homeowners coverage across admitted and non-admitted markets, including FAIR Plan + DIC structures and high-value home programs. We track CDI bulletins, carrier filings, and underwriting appetite changes weekly so we can quote against what is actually open in your ZIP today, not last quarter's appetite.
If you are facing a non-renewal, comparing FAIR Plan options, or shopping after the moratorium expired in your ZIP, book a 30-minute call and we will walk through your options against the current market.