Rising reliance on surplus lines and FAIR Plan coverage highlights growing strain on homeowners insurance market
MALVERN, Pa., Sept. 10, 2026 — Despite homeowners insurance premiums remaining below the national average, California’s insurance market continues to face significant pressures that are limiting coverage availability and driving more consumers toward nonstandard insurance options, according to a new Issues Brief published by the Insurance Information Institute (Triple-I®).
The report, State of the State: California Homeowners Insurance, found regulatory constraints, escalating catastrophe losses, legal system abuse and increasing climate-related risks have combined to create growing instability in the Golden State’s homeowners insurance market.
“California’s insurance challenges are not simply a pricing issue. They reflect a broader imbalance between rapidly growing risks and the ability of insurers to accurately price and manage those risks,” said Sean Kevelighan, CEO, Triple-I. “The state’s recent reforms represent meaningful progress, but continued efforts are needed to restore long-term market stability and ensure consumers have access to affordable coverage.”
Among the report’s key findings:
- California’s excess and surplus (E&S) homeowners market has expanded dramatically, with its share of homeowners direct written premium increasing 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.
- 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.
- Combined, the FAIR Plan and E&S market accounted for approximately 15% of homeowners premium written in California during 2025, meaning only about 85% of premium was written through the standard homeowners market.
- California homeowners insurers experienced an average combined ratio of 122.6 between 2016 and 2025, reflecting 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.
The report noted California Insurance Commissioner Ricardo Lara’s Sustainable Insurance Strategy (SIS) has begun addressing the state’s antiquated regulatory environment due to the restrictions imposed by Proposition 103. The SIS will allow insurers to incorporate modern catastrophe modeling and reinsurance costs into rate filings. Recent reforms have also improved aspects of the state’s rate-review process. However, approval timelines remain substantially longer than national norms, with a median of 225 days compared with a national median of 35 days.
“Creating a more sustainable market, one in which insurance is affordable as well as available, requires aligning premiums with underlying risk while continuing to invest in mitigation and resilience measures at the community and household level,” said Kevelighan. “Consumers benefit most when insurers can confidently compete in the market, offer coverage options and support recovery after disasters.”
About the Insurance Information Institute (Triple-I®)
Since 1960, the Insurance Information Institute (Triple-I®) has been the trusted voice of risk and insurance, delivering unique, data-driven insights to educate, elevate and connect consumers, industry professionals, policymakers, and the media. An affiliate of The Institutes, represents a diverse membership accounting for nearly 50% of all U.S. property/casualty premiums written. Our members include mutual and stock companies, personal and commercial lines, primary insurers and reinsurers – serving regional, national and global markets.
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