Amid costly weather events, states and insurers search for solutions

By EPN Staff

The economic landscape for insurers in California and Florida has become increasingly challenging, as destructive weather events have exacted punishing costs and widespread damage.

In both states, worsening wildfires and hurricanes have pushed insurers to hike premiums and limit availability of coverage.

Why it matters

The responsive measures taken by insurers are posing broader risks to housing markets, energy infrastructure and long-term planning.

In California, mounting wildfire losses have driven major providers to scale back their presence. State Farm, the state’s largest insurer, withdrew from issuing new homeowner policies in high-risk areas last year.

Early this year, the company received approval for a 17% rate increase, with an additional hike under review after citing over $7.6 billion in recent fire-related losses.

The California FAIR Plan – created to offer fire insurance to homeowners who can’t find coverage through private insurers – is increasingly relied upon, despite being designed as a backup option. As wildfires have intensified across the state, the California FAIR Plan now insures far more properties than originally intended.

Florida, meanwhile, remains the most expensive state for homeowners insurance, averaging over $6,000 per year.

As private insurers exit, more policies are being funneled into Citizens Property Insurance Corporation, Florida’s state-run insurer. This year, regulators approved an average 6.6% premium hike, with some properties seeing double-digit increases.

The bigger picture

The consequences of this insurance instability go beyond individual homeowners, with limited insurance coverage discouraging new housing development. In fire-prone parts of California, developers are rethinking solar and grid expansions, while in Florida, storm-prone coastal zones are seeing delays in climate-resilient infrastructure buildout.

In response, California’s Department of Insurance introduced the Sustainable Insurance Strategy, which encourages insurers to consider local mitigation efforts when setting rates. The policy also aims to expand coverage options in high-risk zones, easing reliance on the FAIR Plan. 

Meanwhile, utilities and industry are joining forces through a new coalition to raise awareness of wildfire risks in the western U.S. and advocate for a more concerted national effort to address the challenge.

Florida’s legislature is continuing its push for reform with bills like House Bill 1551, designed to reduce legal costs and attract private insurers back into the market. These reforms aim to stabilize the system, although homeowners will likely still face high out-of-pocket costs.

Additional context

Both states serve as early warning signals for how climate volatility and market dynamics can outpace policymaking, compounding problems that require significant time and financial resources to address.  

Without deeper federal and state coordination, the consequences could extend into energy access and affordability. U.S. Secretary of Energy Chris Wright has emphasized the need to eliminate red tape, particularly around forest management, to ensure proactive measures can be implemented to help mitigate wildfire risks and better control costs.