SACRAMENTO, CA – Governor Gavin Newsom signed Executive Order N-34-25 on September 30, 2025, launching an unprecedented whole-of-government response to California's escalating insurance crisis. The executive order directs multiple state agencies to collaborate on research and recommendations to develop long-term tools that mitigate and fairly allocate the costs of recovering from natural catastrophes, further stabilize the insurance market, make insurance more affordable and accessible, and protect ratepayers.
This landmark action comes as California and states nationwide face what industry experts are calling a climate-fueled insurance crisis that transcends political boundaries. The executive order expedites critical analysis originally mandated for April 2026, reflecting the administration's urgency to protect Californians from the devastating financial impacts of catastrophic wildfires and other climate threats.
For California homeowners who have faced non-renewals, dramatic rate increases, and shrinking coverage options, this executive order represents the most comprehensive state response to the insurance crisis to date. Understanding what this means for your coverage options and costs is essential as these reforms take shape.
The Insurance Crisis That Triggered Action
California's insurance market has been in freefall for the past three years. The statistics are staggering:
Coverage Withdrawals: Major insurers including State Farm, Allstate, Farmers, and USAA have announced they would stop writing new homeowners policies in California or significantly reduce their exposure. State Farm alone stopped writing new policies in May 2023, affecting hundreds of thousands of potential customers.
FAIR Plan Explosion: California FAIR Plan, the state's insurer of last resort, has seen its exposure skyrocket from approximately $5 billion in 2020 to over $25 billion by mid-2025. The plan now covers more than 450,000 policies, a 300% increase in five years. This dramatic growth raises serious questions about the plan's ability to pay claims after a catastrophic event.
Premium Increases: Homeowners who can still find private market coverage face average premium increases of 30-50% at renewal, with some policyholders seeing rates double or triple. In high-risk wildfire areas, annual premiums of $5,000-$10,000 for modest homes have become common.
Economic Impact: The insurance crisis is beginning to affect home values and the broader California economy. Properties that can't secure adequate insurance are harder to sell, and mortgage lenders are increasingly concerned about concentration risk in wildfire-prone areas.
The root cause is clear: Climate change has fundamentally altered California's risk profile. Wildfire losses have exploded from historical averages of $1-2 billion annually to $10-25 billion in recent catastrophic years. The traditional insurance model—based on historical loss data—can't keep pace with rapidly changing climate risks.
What Executive Order N-34-25 Actually Does
The executive order creates a comprehensive framework for addressing the insurance crisis through coordinated state action:
1. California Earthquake Authority as Wildfire Fund Administrator
The California Earthquake Authority (CEA), designated as the Wildfire Fund Administrator, will evaluate and prepare a report on innovative and durable reforms to California's energy utility and insurance markets. This isn't just another study—it's a strategic blueprint for systemic change.
Key Focus Areas:
- Innovative approaches to catastrophe response beyond traditional insurance models
- Sustainable funding mechanisms that don't rely solely on ratepayer or taxpayer support
- Risk mitigation strategies that reduce both frequency and severity of catastrophic losses
- Mechanisms to ensure compensation for wildfire survivors while maintaining market stability
The CEA has issued a formal call for stakeholder contributions, inviting anyone with expertise in natural catastrophe resilience to participate. This collaborative approach ensures diverse perspectives—from insurers and consumer advocates to climate scientists and local government officials—shape the final recommendations.
2. Multi-Agency Collaboration
The executive order requires coordination across multiple state agencies, each bringing specific expertise:
California Department of Insurance: Insurance market regulation, rate approval, solvency oversight, consumer protection
California Public Utilities Commission: Utility regulation, ratepayer protection, wildfire prevention requirements for utilities
Office of Emergency Services: Disaster response coordination, community resilience programs, emergency planning
Department of Forestry and Fire Protection (CAL FIRE): Fire prevention, fuel management, building standards in wildfire zones
Governor's Office of Planning and Research: Land use planning, development patterns, climate adaptation strategies
This coordinated approach recognizes that insurance market stability depends on addressing interconnected issues: utility wildfire liability, building codes, land use planning, fire prevention funding, and climate adaptation.
3. Accelerated Timeline
Originally, SB 254 (signed September 19, 2025) directed the Wildfire Fund Administrator to prepare a report by April 2026. Executive Order N-34-25 expedites this analysis, signaling the administration's recognition that every month of delay means more homeowners losing coverage.
Expected Timeline:
- Q4 2025: Stakeholder input gathering, preliminary research, interagency coordination
- Q1 2026: Draft recommendations, economic impact analysis, feasibility studies
- Q2 2026: Final report with specific legislative and regulatory proposals
- H2 2026: Legislative action and regulatory implementation begin
4. Focus on Fair Cost Allocation
A critical aspect of the executive order is its emphasis on "fairly allocating the costs" of natural catastrophe recovery. This signals potential reforms to how disaster costs are distributed among:
Utility ratepayers: Currently bearing significant wildfire costs through utility rates to fund the state's Wildfire Fund (AB 1054)
Insurance policyholders: Paying higher premiums to cover increasing wildfire risk
Taxpayers: Potentially contributing through state disaster relief, FAIR Plan subsidies, or new public-private partnership mechanisms
Property owners in high-risk areas: Facing questions about whether they should bear higher costs for choosing to live in wildfire-prone zones
The challenge is designing a system that doesn't unfairly burden any single group while maintaining adequate compensation for wildfire survivors and economic incentives for risk reduction.
How This Builds on Existing Insurance Reforms
Governor Newsom's executive order doesn't exist in a vacuum. It accelerates and expands upon insurance market reforms already underway:
Sustainable Insurance Strategy
In September 2023, Governor Newsom issued an executive order urging Insurance Commissioner Ricardo Lara to take swift action to address insurance market challenges. Commissioner Lara responded with the Sustainable Insurance Strategy, a comprehensive package of regulatory reforms:
Forward-Looking Catastrophe Modeling: Allowing insurers to use predictive models that account for future climate risks rather than relying solely on historical loss data. The Department of Insurance completed review of three catastrophe models in 2025, enabling insurers to more accurately price risk.
Increased Coverage Requirements: Insurers that use new catastrophe modeling must commit to writing more policies in distressed areas, expanding coverage where it's most needed.
Regulatory Streamlining: Expedited rate review processes to let insurers adjust pricing more quickly in response to changing risk, while maintaining consumer protections.
Reinsurance Cost Recognition: Allowing insurers to include reinsurance costs (the insurance that insurance companies buy) in rate calculations, making California rates more actuarially sound and potentially more competitive.
These reforms are beginning to show results. In recent months, several insurers announced plans to expand writing in California, and some previously withdrawn carriers are exploring re-entry.
Recent Legislative Wins
The executive order follows closely after significant legislative achievements:
SB 254 (Becker): Signed September 19, 2025, creates the next generation of California's Wildfire Fund to support wildfire survivors and protect ratepayers from excessive utility liability costs. The bill ensures utilities have adequate resources to compensate wildfire victims without threatening financial stability or causing massive ratepayer increases.
SB 495 (Allen) - "Eliminate The List" Act: Requires insurers to pay 60% of contents coverage limits (capped at $350,000) to total-loss wildfire survivors without requiring detailed inventory lists. This reform addresses the cruel practice where insurers demanded fire victims prove ownership of belongings that were completely destroyed. The law also grants consumers at least 100 days to provide proof of loss following a declared state of emergency.
SB 547 (Pérez and Rubio) - Business Insurance Protection Act: Extends the insurance moratorium (prohibiting policy non-renewals after wildfires) to commercial policies, protecting businesses, homeowners' associations, condominiums, affordable housing, and nonprofits. This ensures communities can fully recover, not just individual homeowners.
These legislative victories demonstrate a comprehensive approach: protecting consumers through better claims handling rules while simultaneously stabilizing the underlying insurance market through regulatory reform and utility wildfire funding.
What This Means for California Homeowners
If you're a California homeowner struggling with insurance, here's what Executive Order N-34-25 means for you:
Near-Term (Next 6-12 Months)
Market Stabilization Continuing: The combination of the Sustainable Insurance Strategy and industry response should continue improving coverage availability. If you've been unable to find private market insurance, check again every 3-6 months. Several insurers are beginning to write new policies in previously restricted areas.
FAIR Plan Improvements: As the state addresses long-term stability, expect enhanced FAIR Plan coverage options and possibly improved pricing. The FAIR Plan will remain critical for high-risk properties, but reforms should make it a more viable option.
Rate Increases Moderating: While premiums will likely continue rising, the rate of increase should moderate as insurers gain confidence in regulatory reforms and their ability to price risk accurately. Expect 15-25% increases rather than 40-60% spikes seen in 2023-2024.
Wildfire Mitigation Incentives: Homeowners who invest in defensible space, fire-resistant materials, and home hardening should see these efforts increasingly reflected in insurance pricing and availability. Insurers using new catastrophe models can better reward risk reduction.
Medium-Term (1-3 Years)
New Coverage Models: The CEA's research will likely recommend innovative insurance mechanisms beyond traditional policies. Possibilities include:
Parametric Policies: Coverage that pays predetermined amounts when specific wildfire conditions occur (e.g., fire within certain distance of property, regardless of actual damage). These policies pay out quickly without lengthy claims processes.
Pooled Risk Models: Community-based or regional insurance pools that spread risk across broader areas, potentially with state backstop support.
Public-Private Partnerships: Hybrid models where government shares some catastrophic risk with private insurers, similar to the National Flood Insurance Program but better designed and sustainably funded.
Risk-Based Pricing Transparency: Expect clearer disclosure of how your property's specific risk factors affect pricing, giving you actionable information about which mitigation measures provide the best return on investment.
Long-Term (3+ Years)
Comprehensive Climate Adaptation: The executive order's focus on "long-term durable tools" suggests California is moving toward a comprehensive climate adaptation framework where insurance is one component of a broader system including:
- Stricter building codes in wildfire zones
- Land use restrictions in highest-risk areas
- Enhanced public investment in fire prevention and suppression
- Community resilience funding
- Potential relocation assistance for properties in untenable risk zones
Sustainable Market Structure: The goal is an insurance market that functions without massive government subsidies or intervention while providing adequate coverage at prices that reflect true risk but remain affordable for most homeowners.
The Broader Context: A National Insurance Crisis
While California's action is state-specific, the insurance crisis is national. Understanding this helps explain why California's response matters beyond state borders.
Florida: Also facing insurance market collapse with dozens of insurers going insolvent and Citizens Property Insurance (Florida's equivalent of FAIR Plan) covering over 1.3 million policies. Florida homeowners face premiums averaging $6,000-10,000 annually—highest in the nation.
Louisiana: Hurricane risk has driven major insurers to exit the market. Louisiana Citizens Property Insurance has grown 300% since 2020. Many coastal properties are effectively uninsurable in the private market.
Texas: Hailstorm frequency and severity increases have made homeowners insurance unprofitable for many carriers. Some insurers have exited entire metro areas.
Colorado: Wildfire risk similar to California's has triggered coverage restrictions and premium increases in mountain communities.
The common thread: Climate change is fundamentally breaking traditional insurance models nationwide. As Governor Newsom noted, "There's no Republican or Democrat thermometer—red and blue states alike, and countries around the world, are facing this climate-fueled insurance crisis."
California's approach—comprehensive government coordination, stakeholder collaboration, innovative solution exploration, and fair cost allocation—could become a blueprint for other states and even federal policy.
Critical Questions the Executive Order Must Address
As California develops recommendations, several thorny questions demand answers:
Should High-Risk Development Be Restricted?
If certain areas are fundamentally uninsurable at reasonable costs, should California restrict new development there? And what about existing homes? This raises profound questions about property rights, housing supply, and equitable access to California's communities.
How Should Costs Be Allocated?
Should coastal residents subsidize insurance for those in wildfire zones? Should urban areas subsidize rural areas? Should current residents pay for past development decisions that created high-risk communities? There's no consensus, and any allocation mechanism will face fierce debate.
What's the State's Financial Commitment?
California's budget faces perpetual challenges. How much state funding should support insurance market stability? Should it come from general funds or dedicated taxes on specific activities? And what happens during recession when state revenues decline but wildfire risk remains?
How Do You Incentivize Risk Reduction?
If insurance becomes available regardless of mitigation efforts, what motivates homeowners to invest in fire resistance? Conversely, if insurance becomes unavailable or unaffordable without extensive mitigation, how do lower-income homeowners afford necessary improvements?
What Happens to Property Values?
If certain areas become known as "uninsurable," property values will plummet. This creates equity concerns—longtime residents who built substantial wealth through home equity could see it evaporate. How does California balance insurance market stability with protecting homeowners' financial security?
How to Prepare as Reforms Take Shape
While California develops long-term solutions, homeowners need to act now:
1. Document Your Mitigation Efforts
Insurers increasingly reward risk reduction. Document everything:
- Defensible space maintenance (remove vegetation within 100 feet)
- Fire-resistant roofing, siding, and windows
- Enclosed eaves and vents with fire-resistant screening
- Deck replacement with fire-resistant materials
- Vegetation management and landscaping choices
Take photos, keep receipts, and obtain certifications where available (like Fire Safe Council inspections). When insurers expand in your area, you'll have evidence that makes your property more attractive to underwrite.
2. Shop Regularly
The market is improving, but not uniformly. Insurance availability changes quarterly as insurers adjust their appetite. Even if you were declined six months ago, reapply now. Work with independent agents who access multiple insurers rather than captive agents representing one carrier.
3. Optimize Your FAIR Plan Coverage
If you're on the FAIR Plan, consider:
- Purchasing a "wraparound" or "difference in conditions" policy from private insurers to supplement FAIR Plan's basic coverage
- Exploring whether you qualify for private market insurance now that some carriers are returning
- Ensuring your FAIR Plan coverage limits are adequate—many policyholders are underinsured
4. Engage in the Process
The CEA has invited stakeholder input. If you're a homeowner affected by the insurance crisis, your perspective matters. Submit comments, attend public meetings, and work with local elected officials to ensure homeowner voices are heard as reforms are designed.
5. Consider Long-Term Property Decisions
If you're buying property in California, insurance availability and cost must be part of your decision calculus. Properties in lower fire-risk areas (urban centers, coastal areas with low vegetation, communities with robust fire protection) will likely have more stable insurance markets and better resale value.
If you own property in high-risk areas, consider whether insurance costs and availability concerns suggest it's time to sell while the market is still relatively strong, before insurance issues materially affect values.
The Path Forward: Challenges and Opportunities
California's executive order represents recognition that incremental reforms aren't sufficient. The insurance crisis demands comprehensive, coordinated, innovative solutions.
Challenges Ahead:
- Balancing actuarially sound insurance pricing with affordability
- Designing sustainable public-private risk-sharing mechanisms
- Ensuring equitable cost allocation that doesn't unfairly burden any group
- Maintaining insurer participation while protecting consumers
- Addressing long-term questions about development in high-risk areas
Opportunities Created:
- California can pioneer insurance models for the climate change era that other jurisdictions adopt
- Comprehensive reforms could create more stable, predictable insurance markets than the current crisis situation
- Coordinated government action can address interconnected issues (utility wildfire liability, building codes, land use) that individual agencies can't solve alone
- Stakeholder collaboration can build consensus around difficult tradeoffs
For homeowners navigating this transition, the key message is clear: Change is coming, and it's comprehensive. Stay informed, adapt your risk management strategies, and recognize that California's insurance market in five years will look significantly different from today.
The insurance crisis that has devastated California homeowners over the past three years finally has a comprehensive response strategy. Whether that strategy succeeds depends on the difficult choices California makes in the coming months—choices that will ripple across the nation as other states face their own climate-driven insurance challenges.
Need help navigating California's changing insurance landscape? As the market evolves through regulatory reforms and new coverage models, finding adequate protection at reasonable cost requires expertise and access to multiple insurance options. Whether you're struggling to find coverage, facing massive premium increases, or trying to understand how new regulations affect your property, working with professionals who stay current on California's rapidly changing insurance environment can help you make informed decisions and secure the protection your home needs.
Modern insurance platforms like Soma make it easier to compare options, understand your coverage, and find solutions even in challenging markets. As California implements comprehensive reforms, staying informed and working with knowledgeable partners ensures you're positioned to benefit from improving conditions while protecting your most valuable asset.
Sources: Office of Governor Gavin Newsom, California Department of Insurance, California Earthquake Authority, Insurance Information Institute, California FAIR Plan, SB 254 Legislative Analysis, Sustainable Insurance Strategy Documentation