Former San Francisco Supervisor Jane Kim overcame her lack of name recognition to win the race to be California‘s next insurance commissioner by making a novel proposal: establishing a government-run wildfire program that would radically overhaul the state’s troubled home insurance market. Her Natural Disaster Insurance for All plan promises to make home insurance affordable and increase its availability by taking the profit motive out of the system, eliminating costs such as high executive salaries and, most importantly, having as a core mission the reduction of growing wildfire risks that have caused a series of catastrophic blazes in the last decade.
Those blazes — culminating in the Jan. 7, 2025, firestorms that damaged or destroyed more than 16,000 structures in the Pacific Palisades and Altadena areas alone — caused insurers to drop policyholders in fire-prone areas while raising rates, though statewide they remain near the nationwide average depending on the study. As a consequence, the state’s privately operated insurer of last resort, the California FAIR Plan, has seen residential policies more than double to 677,000 since 2022 even as it surcharged residential policyholders statewide to help pay for $4 billion in January 2025 losses.
“We understand that this is a bold proposal, and I think that the crisis demands a bold proposal,” Kim said in an interview. “The current framework is failing, and if you talk to your everyday Californian, they don’t believe the current system is working.” The idea for a state-run wildfire plan funded by policyholders is not unique. A similar plan was briefly outlined as an option in a natural catastrophe resilience study ordered by Gov.
Gavin Newsom this year in response to climate
Gavin Newsom this year in response to climate change and the Palisades and Eaton wildfires. It also would not be the only state-operated insurance program. The California Earthquake Authority was established in 1996 following the 1994 Northridge earthquake, when insurers were not willing to offer the coverage. Still, insurance industry officials, consumer advocates and others say that the incoming commissioner’s plan, never tried before in the U.S., leaves fundamental issues such as startup financing and claims handling yet to be fleshed out, and even Kim acknowledges she sees it as a starting point.
“What she’s proposing is what would be a really big wholesale change here in California, and there are a lot of details, a lot of steps, between now and that coming together,” said Denni Ritter, a government relations vice president at the American Property Casualty Insurance Assn., a leading industry trade group. “I believe the insurance industry feels that wildfire is an insurable peril” without such a program, she said.
Kim was criticized during the campaign by her rival, state Sen. Ben Allen (D-Santa Monica), a fellow Democrat who represents the Pacific Palisades fire zone and lost by a narrow margin, for providing little detail on her plan. But in October her campaign released a policy brief that filled in some of the blanks. It envisions commercial carriers continuing to sell coverage for perils such as water damage, wind, theft, liability and ordinary house fires, but no longer covering damage caused by large wildfires, though they would sell those policies on behalf of the new state plan.
Wildfire coverage would be mandatory, with the state
Wildfire coverage would be mandatory, with the state program holding the risk and funding claims. Premiums would be split between an amount covering a home’s individual fire risk and rebuild costs — to cover the plan’s losses in a typical fire year — and a small capped fee to build capital in the case of a bad wildfire season, such as in 2025. The wildfire coverage would be limited to the cost to fully rebuild a “typical” California home — no exact amount is specified — with owners of more expensive homes able to buy additional coverage on the commercial market.
The idea is to ensure that the plan focuses on “ordinary homeowners and not on rebuilding mansions,” according to the brief. The plan would cover all existing homes, with eligibility for new homes to be explored based on their wildfire risk and how much of that is mitigated. Left to be determined is whether wildfire claims would be handled by carriers who insure a homeowner’s other perils, or whether the plan would hire and manage its own adjusters.
Following the 2025 wildfires, claims management has risen to be a top issue. The Department of Insurance and Los Angeles County are investigating multiple home insurers, including State Farm General, the state’s largest, over how they handled claims, following policyholder complaints of delays, underpayment and denials. Chuck Nyce, a professor of insurance at Florida State University’s Herbert Wertheim College of Business, said that the challenges of a state plan handling its own claims was studied in a report the school submitted to its House of Representatives on having Florida assume all hurricane risks.
He said that would require the state
He said that would require the state to contract with a large number of adjusters so they are ready when a catastrophe strikes, while a big insurer has them in place, constantly busy, so that can be shifted as needed. “You’re going to be paying them year-round for part-time work, but that part-time work is really important,” said Nyce, who has provided his expertise to California’s independent Little Hoover Commission watchdog agency, which issued a 2024 report on the home insurance market.
Having a carrier’s adjusters handle claims the insurers are not paying for creates its own possibility for ballooning costs, he added: “They have little to no incentive to do it properly. They just should pay the full amount of every claim, because then it looks good to them.” Perhaps an even more fundamental issue to be decided is how to raise an estimated $25 billion that the state study estimated would be needed for startup capital in the case of a bad fire year.
The study explored funding this amount through such mechanisms as bond sales, assessments and reinsurance, which is acquired by insurers typically from large international companies to cover catastrophes that could otherwise wipe them out. Relying on significant reinsurance could lower the needed startup capital to $6 billion, the study found, but given its costs could result in aggregate homeowner insurance premiums rising from $18 billion today to more than $20 billion.
Kim says that a public model could eventually
Kim says that a public model could eventually reduce wildfire risks to make home insurance more affordable. Others question that. Carmen Balber, executive director of Los Angeles advocacy group Consumer Watchdog, said that using reinsurance to significantly capitalize an insurance program can be problematic because it can result in high premiums or high deductibles to keep premiums down.
She cited the California Earthquake Authority as an example. “That has been the No. 1 concern we’ve always had, because we have an example of state disaster insurance: It’s the CEA, and it’s broken,” she said. “The insurance industry has been collecting our premiums for a century, and nationwide has built up $1.2 trillion in surplus in case the worst catastrophe ever strikes. How do we replicate that on a California scale?” The costs for a CEA policy vary widely depending on a home’s age, construction, location and the policy deductible, which ranges from 5% to 25%.
The authority, initially capitalized by participating insurers, has fewer than 1 million policies, largely for homes but also condos, rentals and mobile homes. An annual homeowner premium would typically cost at least $2,000, by one estimate. Ben Deci, a CEA spokesperson, said the authority’s reinsurance has declined the last few years, with the cost of premiums driven by its capacity “to pay all claims from an earthquake even larger than the most destructive in California’s history — the 1906 San Francisco earthquake.” Kim said a comparison to the earthquake authority is not valid, since it’s a voluntary program with a smaller risk pool, while wildfire coverage would be mandatory for California’s millions of homeowners.
Her policy brief discusses exploring legislation that would
Her policy brief discusses exploring legislation that would require insurers to contribute starting capital in proportion to their market share, but that could spark a big fight with the industry. Rex Frazier, president of the Personal Insurance Federation of California, a trade group of state property and casualty insurers, cautioned about that approach. “Any bill to coerce insurers to fund a state government program that replaces insurers that are currently selling directly in the market or indirectly through the FAIR Plan will trigger hard legal and policy questions,” Frazier said.
He also contended that the state’s home insurance crisis is easing following reforms last year, including allowing insurers to charge policyholders for reinsurance costs, with some carriers starting to write new policies again. The FAIR Plan reported adding 2,230 net new policies in the third quarter, down from 12,406 net new policies in the second quarter. Kim said that claims adjustment, startup financing and many other elements of her plan will need to be hashed out with legislative leaders, consumer advocates and other stakeholders, and that in the end reform could result in a public-private partnership or take another form.
“People are really getting way ahead of themselves, and they’re creating what they think is going to be what happens. But ultimately, what happens is we’re going to go to the negotiating table with a bunch of ideas, we’re going to figure out how to make it work, and we’re going to put consumers first,” she said. Amy Bach, co-founder of United Policyholders, a San Francisco-based insurance advocacy group, said that it is clear there are serious problems with the current system for handling catastrophic events Kim is trying to fix.
“It’s a very, very ambitious, complicated plan, but if she comes up with a better mousetrap, we will help,” she said.
