Navigating California’s Hard Homeowners Insurance Market
- Nicole Nouhra
- 10 minutes ago
- 3 min read
By Nicole Nouhra CPRM, CISR, CAPI
Managing Director, Premier Private Client Insurance Services
Homeowners insurance costs are rising nationwide, with ICE Mortgage Technology reporting nearly a 70% increase in average premiums over the past five years. In California, however, the challenge extends beyond higher prices: many residents are struggling to obtain coverage at all.
The state is in an unusually hard insurance market—where coverage is limited, underwriting is strict, and premiums continue to climb. Years of severe wildfire losses, persistent catastrophe risk, carrier withdrawals, and regulatory pressures have strained the system.
Nine of the ten costliest U.S. wildfires, measured by insured losses, have occurred in California, and all but one have taken place since 2017. The recent Palisades and Eaton fires offer a reminder of how quickly conditions can deteriorate.
Despite these pressures, homeowners—particularly those with high-value properties—still have viable paths to securing insurance. A key starting point is understanding the difference between admitted and non-admitted carriers.
Admitted vs. Non-Admitted Markets
Admitted carriers operate under the authority of the California Department of Insurance (CDI). They must file rates, meet strict solvency standards, and participate in the state guaranty fund.
In recent years, however, many middle-tier and high-net-worth insurers, including PURE, Cincinnati, AIG, and Chubb, have reduced business in the admitted market.
With this pullback, non-admitted or surplus lines carriers have stepped into the void. Also, some high-end insurers created their own non-admitted entities to help meet the need. Because surplus lines companies do not file rates with the CDI and do not participate in the guaranty fund, they can price risk more flexibly—but offer less regulatory protection to consumers.
These insurers can be perfectly appropriate options, yet the range of quality is wider. Policies may differ significantly in exclusions, conditions, and claims practices. In this market, financial strength and long-term commitment become critical—especially when a single wildfire event can generate multi-million-dollar losses.
Why Ratings Matter
That makes choosing financially sound insurers one of the most important decisions a homeowner can make. AM Best remains the industry’s leading authority on insurer strength.
As Florida’s insurance market deteriorated, Demotech emerged as an alternative rating agency for carriers that did not qualify for AM Best. Many of those insurers eventually failed—St. Johns, Weston, and UPC among them—after losing reinsurance support, sustaining concentrated losses, or facing substantial litigation.
Demotech-rated insurers are now appearing in California. While their premiums may be competitive, they come with notable risks: historically higher failure rates, possible conflicts with umbrella carriers that refuse to schedule lower-rated underlying policies, and the danger of losing coverage mid-crisis if a company becomes insolvent.
Whenever competitive and available, AM Best–rated insurers should be prioritized. In a state where catastrophic losses can unfold over a single dry, windy weekend, financial stability is essential.
The California FAIR Plan: A Last Resort
For homes in high-risk wildfire zones, the California FAIR Plan has increasingly become the only accessible insurance option. More than 600,000 homes now rely on this last-resort insurer.
The FAIR Plan provides limited, fire-only coverage and leaves substantial gaps. It was never intended to serve as a full homeowners policy and should remain an option of last resort—not a primary solution.
Making the CA FAIR Plan Work: DIC Policies
Pairing a CA FAIR Plan policy with a Difference-in-Conditions (DIC) policy provides homeowners with essential protection against uncovered risks.
Contrary to common belief, a DIC policy does not extend or “sit on top of” the CA FAIR Plan. Instead, it supplies coverage for non-fire perils—such as liability, water damage, theft, and wind—creating a two-policy structure intended to function as a complete program. Even so, gaps can remain, and navigating them requires experienced guidance.
California’s homeowners insurance market is unlikely to normalize soon. Working with an experienced insurance agent can help provide a clear understanding of available options and develop a thoughtful strategy so that homeowners can secure durable protection—even in this challenging environment.
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