Request for Feedback: Fire Insurance Legislation
July 23, 2020
CSAC is requesting feedback on the following proposed bills related to fire insurance in high fire threat areas by close of business Thursday, July 30. Please email Legislative Analyst Nick Cronenwett at firstname.lastname@example.org with any thoughts or feedback.
AB 2167 (Daly) and SB 292 (Rubio) would create an Insurance Market Action Plan (IMAP) program that would allow the Insurance Commissioner to approve reasonable rates in high fire threat counties based on insurer solvency, mitigation efforts, and other factors. Under the language of this proposed legislation, insurers may propose rates which “shall not be excessive, inadequate, or unfairly discriminatory, and shall be actuarially sound so that premiums are adequate to cover expected losses, expenses, and taxes, and shall reflect investment income of the insurer.”
Upon the Commissioner’s approval of proposed IMAP rates, insurers would be required to offer new and renewal residential property insurance policies in a set of IMAP counties until the insurer achieves a market penetration rate in those IMAP counties that is no lower than 85 percent of its statewide market penetration rate. CSAC has included the proposed language from AB 2167 that would enact the insurer’s obligation to offer policies in high fire threat counties for county review and feedback. Please see below.
(b) (1) An insurer shall commit in the IMAP to offer new and renewal residential property insurance policies in a set of IMAP counties until the insurer achieves a market penetration rate in those IMAP counties that is no lower than 85 percent of its statewide market penetration rate. The IMAP commitment shall be calculated based on the insurer’s residential property insurance policy count across the entire designated set of IMAP counties, but need not be met in each county individually.
(2) Notwithstanding paragraph (1), an insurer shall monitor and avoid overconcentration in any one particular area within an IMAP county or across a particular IMAP county in order to prevent a catastrophic loss that could impair its solvency.
This proposed IMAP process would only be available in counties with specified numbers of new single family homeowner policies issued through the California FAIR Plan, California’s insurer of last resort. In addition to the creation of proposed advisory committees, the proposed policy package would also require the Office of Planning and Research to conduct a study of the IMAP program by January 2023 to determine if the program has achieved average admitted market rates lower than the California FAIR Plan and would require an analysis of the IMAP program toward achieving market penetration goals.
Currently, language in AB 2167 (Daly) and SB 292 (Rubio) requires that both pieces of legislation must adopted and signed to become law. AB 2167 is expected to be heard in Senate Insurance Committee on August 4, while SB 292 is expected to be heard in Assembly Governmental Organization on August 3. Legislative analysis for each bill, including most recent support and opposition can be found below.