By Lewis Nibbelin, Research Writer, Triple-I
While California’s homeowners insurance premiums remain more affordable than the national average, a closer look at the relevant data reveals continuing pressures that impact affordability and availability, according to Triple-I’s latest Issues Brief.
Prior-approval requirements for rate changes under California’s three-decades-old Proposition 103 have kept insurers from raising rates in line with the state’s evolving risk profile. These constraints – combined with escalating catastrophe losses and legal system abuse – limit insurers’ appetite to write the amount of coverage Californians need.
The impact is perhaps most apparent in the state’s excess and surplus (E&S) lines insurance market. E&S insurance is designed to cover high-risk homes and businesses that struggle to obtain coverage from the standard market. E&S insurers are regulated differently from the standard market for various reasons, including to allow greater flexibility to customize policies or raise rates.
E&S coverage is intended to supplement – not replace – standard insurance. Yet the average E&S market share of homeowners direct written premium surged to 4.8% in recent years, rising to 7.3% in 2025 – the highest share among the nation’s largest homeowners insurance markets.
Growth in California’s residual market also points to the crisis. Thirty-four states and the District of Columbia maintain residual property insurance markets, commonly known as “insurers of last resort” – in California, formally named the FAIR Plan. Unlike roughly half of these states, California’s residual market does not underwrite homeowners policies. The bulk of its policyholders purchase dwelling fire policies, which cover only damage caused by the specific loss (e.g., fire, lightning, smoke) listed in the policy.
Offering less coverage for a higher premium, the FAIR Plan was designed as a temporary solution until policyholders could secure insurance from the standard market. Yet exposure in the FAIR Plan has skyrocketed, valued at $768 billion as of June 2026, an 11% increase since September 2025 (the prior fiscal year-end) and a 250% increase since fiscal year-end 2022. Policy count has ballooned 157%, from about 270,000 in 2022 to nearly 700,000 this June.
Calculated as a share of the homeowners and dwelling fire markets combined, residual market size was 7.7% of homeowners direct written premium in 2025. Adding the E&S homeowners market share of 7.3%, roughly 15.0% of homeowners premium was written on a nonstandard basis in 2025.
In other words: only 85.0% of homeowners premium in California was written on a standard homeowners policy in 2025.
While recent reforms now allow California insurers to use modern catastrophe modeling and factor reinsurance costs into rates for the first time, rate filing approval times still rank among the slowest in the nation, stemming from Prop 103’s extreme prior approval system. Returning balance to the market will require coordinated mitigation alongside premiums that align more closely with the underlying risk, demanding collective action at all levels.
Learn More:
New Triple-I Index Tracks Insurance Affordability Trends by State
Trends and Insights: California Struggles to Fix Insurance Challenges
L.A. Wildfire Recovery Demands Collective Action
Historic Wildfire Season Highlights Nationwide Vulnerability
Resilient Post-Wildfire Rebuilding Pays Off
Triple-I Legal System Abuse Awareness Campaign Enters California, Illinois
