California’s homeowners insurance market is increasingly relying on nonstandard coverage options, with the FAIR Plan and excess and surplus lines accounting for approximately 15% of premium written in 2025.

The Insurance Information Institute (Triple-I) released a members-only Issues Brief titled State of the State: California Homeowners Insurance, highlighting regulatory constraints and escalating catastrophe losses as key drivers of this shift.

Market Shift to Nonstandard Options

The data reveals a significant migration away from the standard homeowners insurance market. Combined, the FAIR Plan and the excess and surplus (E&S) market represented about 15% of homeowners premium written in California during 2025. This leaves only approximately 85% of premium being written through the standard market.

Exposure in California’s FAIR Plan reached $768 billion as of June 2026, reflecting a 250% increase since 2022. Policy counts grew 157% during the same period, rising from approximately 270,000 to nearly 700,000 policies.

The E&S homeowners market also expanded dramatically. Its share of homeowners direct written premium increased from an average of 1.1% during 2016-2020 to 4.8% during 2021-2025. By 2025, the E&S share reached 7.3%, representing the highest growth rate among the nation’s largest homeowners insurance markets.

Underwriting Challenges and Regulatory Environment

Insurers in California experienced an average combined ratio of 122.6 between 2016 and 2025. This figure reflects the impact of catastrophic wildfire losses and long-term underwriting challenges. Insurers have paid more than $22 billion in claims related to the 2025 Los Angeles wildfires alone.

Despite these pressures, homeowners insurance premiums in California remain below the national average. Sean Kevelighan, CEO of Triple-I, stated that the challenges are not simply a pricing issue but reflect a broader imbalance between rapidly growing risks and the ability of insurers to accurately price and manage those risks.

Regulatory Reforms and Delays

The report noted that California Insurance Commissioner Ricardo Lara’s Sustainable Insurance Strategy (SIS) is addressing the state’s antiquated regulatory environment imposed by Proposition 103. The SIS will allow insurers to incorporate modern catastrophe modeling and reinsurance costs into rate filings.

However, approval timelines remain substantially longer than national norms. The median approval time in California is 225 days, compared with a national median of 35 days. Recent reforms have improved aspects of the state’s rate-review process, but continued efforts are needed to restore long-term market stability.

What the Numbers Show

The divergence between premium levels and market stability is evident. While premiums remain below the national average, the combined ratio of 122.6 indicates structural underwriting losses over the decade. This suggests that current pricing mechanisms are insufficient to cover the actual cost of claims, particularly given the $22 billion in wildfire claims from 2025 alone. The rapid expansion of the FAIR Plan and E&S markets serves as a direct indicator of this pricing inadequacy in the standard market.