California announces insurance reforms to cope with climate change impacts

California, one of the most disaster-prone states in the US, has unveiled a series of insurance reforms to address the challenges posed by climate change. The state’s top leaders announced on Thursday that they are making changes to the state’s insurance system to stabilize the market and protect consumers from rising premiums and reduced coverage.

State Farm stops accepting new applications for home insurance

The announcement came after State Farm, the largest provider of home insurance in California, said it would stop accepting new applications for that service in the state. The company cited the increasing frequency and severity of wildfires and other natural disasters as the reason for its decision. State Farm said it would continue to renew existing policies and offer other types of insurance in California.

State Farm’s move follows similar actions by other major insurers, such as Allstate and State Farm, who have pulled back coverage in some parts of the state or raised their rates significantly. According to the California Department of Insurance, seven out of the state’s top 12 carriers have reduced their exposure in the state by more than 15 percent in the last year.

California announces insurance reforms to cope with climate change impacts

California plans to create a public option for home insurance

To address the growing insurance gap, California Insurance Commissioner Ricardo Lara and Governor Gavin Newsom announced that they are working on creating a public option for home insurance. The public option would be a nonprofit entity that would offer affordable and comprehensive coverage to homeowners who cannot find it in the private market. The public option would also be designed to incentivize risk reduction and resilience measures, such as installing fire-resistant materials and clearing vegetation around homes.

Lara and Newsom said they are collaborating with lawmakers, consumer advocates, environmental groups, and industry representatives to develop the public option proposal. They said they hope to introduce legislation on the public option next year.

California joins global initiative to promote sustainable insurance

In addition to the public option, California also announced that it is joining the UN Environment Programme’s Principles for Sustainable Insurance Initiative (PSI), a global network of insurers, regulators, and stakeholders who are committed to integrating environmental, social, and governance factors into their business practices. California is the first US state to join the PSI, which has more than 140 signatories from 30 countries.

By joining the PSI, California will collaborate with other members to develop innovative solutions that reduce climate risks and protect natural ecosystems. For example, new insurance products could be developed to promote cooler streets and renewable energy. Lara said that joining the PSI will help California leverage its influence as one of the world’s largest insurance markets to drive positive change in the industry.

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