The best way to tell that the California homeowners insurance market has been a bear is to see where buyers facing higher rates and lack of options in traditional markets are going for alternatives. One choice is the surplus lines market, where there has been growing evidence of a surge in demand.

The latest data on that trend is unequivocal. Surplus lines homeowners insurance transactions were up 119% in the first half of the year from the same period last year, when transactions were already on the rise.

Transactions, which include new business, renewals, extensions and endorsements, reached 171,551 in the first six months of this year. That was up from 78,309 transactions last year at this point, according to new data from the Surplus Line Association of California.

The massive uptick in surplus lines interest follows a wide-ranging pullback by admitted carriers from the state.

“We have continued to see growth in surplus lines homeowners’ policies throughout the first half of 2025, building on the sharp surge that began in mid-2023 when major admitted carriers began scaling back coverage,” said Benjamin J. McKay, CEO and executive director of the association. “Transactions remain up year-over-year—more than doubling in Q1 and more than doubling overall.”

Related: Wildfire Season Preview: Rest of 2025 Is High-Risk, May Follow LA Wildfires Paradigm

McKay called out an increase in take-up from homeowners in riskier areas, where surplus lines carriers have found a way to offer more coverage. The group’s data shows a continued expansion into rural, semi-rural and wildland-urban interface areas.

“The average premium per policy has dropped by 25% compared to 2024, suggesting that surplus lines carriers are increasingly covering homes with lower insured values, often in higher-risk zones,” McKay said. “Surplus lines is not where homeowners turn first, but when standard options disappear, it serves as a critical relief valve that helps preserve access to coverage Californians might otherwise lose entirely.”

Admitted to Non-Admitted

Homeowners are finding their way to surplus lines guided by brokers like Lacey Garrison Strom, who has increasingly sought relief for her clients in that market after not finding enough affordable options from admitted carriers.

Garrison Strom, executive vice president, director of family office at Heffernan Insurance Brokers, said she has been encouraged by signs of interest in writing policies lately from carriers in both the admitted and non-admitted spaces, though with much stricter underwriting demands.

However, a market trend that has stood out to the 25-year-plus insurance professional is the interest from admitted carriers in selling non-admitted policies.

“What we’re also seeing is big carriers that have a surplus lines side to their business—like the Chubbs of the world the AIG’s of the world, obviously Nationwide it has Scottsdale—we’re seeing them move towards a non-admitted product in California, and I think you’re going to start to see more and more carriers do that because then they can price it appropriately.”

Her observations so far reflect what the surplus lines association data shows, and her experience has been that taking clients to the non-admitted market doesn’t necessarily mean they are paying more. These buyers are also benefitted by on a policy form that enables them to work with underwriters on things like higher deductible options and carve backs on certain coverages.

“We have a lot more flexibility on the E&S side on the forms, so it allows the carrier to get more comfortable with the risk because they can tighten what they’re actually insuring, they can shave back coverage,” Garrison Strom said. “So, I think that there’s this misunderstanding that non-admitted just means the carriers want to charge you a lot more because they can’t get their rate filings with the state, but that’s not all of it. A lot of it is being able to pull back on coverage that is too robust on their admitted form.”

Steve Rivera, a who heads up personal lines at Liberty Company Brokers Inc., has also been working more with homeowners lately in surplus lines, where he and his team have learned to bring only what the ever-pickier carriers will consider good business.

“They’re underwriting for proximity to brush, they’re starting to require different risk management solutions, such as ember-resistant venting, clearing zones from the home with no combustibles. They are asking for trees to be cut back 10 feet from the house, no overhanging limbs—for gutter guards for the rain gutters,” said Rivera, who is a partner working out of the firm’s Los Angeles office. “There’s a lot of proactive risk management that’s being asked of clients.”

Rivera has a client with a roughly $10 million-dollar home in a canyon area in the Los Angeles area with bad access, and the local fire department is more than 5 miles away.

Hi clients have spent more than $250,000 of resources to harden the home from fire, and they are still working on pricing. They received a tentative pre-approval for a limit of just over $6 million, which is roughly the full replacement cost of the home. But the deal still isn’t done.

“There’s a lot of lot more things that they’re going to do—installing the water leak detection system and the seismic shutoff valve, and putting gutter guards on the rain gutters—and we’re really trying to clear zone 1 of the home, which they’ve already done a pretty good job of doing,” he said. “There’s a fire suppression system that we’re working on installing, which is going to be another couple hundred-thousand bucks.”

Pitch Count

In the admitted market, Rivera said he and his team are on a sort of pitch count with carriers.

“So, you only get like four or five policies a month for an entire agency, which is kind of tough,” Rivera said.

These carriers are also shunning homeowners business from all but those brokers who bring the best business to bring them.

Brokers with good loss ratios and a good mix of business continue to write business—on the pitch count, he said.

“So, what insurance companies have done is they’ve turned around and said, ‘Hey look, we don’t want to write new business, we’re going to be very selective on the accounts that we take and we’re going to be very selective on how many we take,’” Rivera said. “So, we’ve got to be selective as an agency, to pick the right accounts and they’ve got to be full accounts. They’re not just writing homeowners, now they’re saying ‘We want the home, the auto, and the umbrella, and they can’t have any accidents or tickets, and so you got to bring us pretty clean drivers.’”

The American Property Casualty Insurance Association was reached out to for comment on the so-called pitch count and standards carriers expecting from brokers brining them homeowners business in California.

The group replied with a statement via email to be attributed to APCIA’s Robert Passmore, department vice president of personal lines.

“Companies determine their own appetites for taking on new risks and may limit, or increase, based upon conditions in the market,” the statement reads. “This is one reason why shopping around is important, since each company makes its own decision on what they charge, and how many policies they wish to write.”

According to the CDI, there is no statute that prohibits insurers from any of these practices, since they are purely a contractual matter between the carriers and their contracted agents.

“Under the limits of Prop 103, insurance companies can choose which policies to write and at what level, and some insurance companies are only providing a limited number of policies per month to their contracted agents,” states a response from a CDI spokesman who was asked for feedback on the pitch count.

Despite being put on a pitch count and facing tough standards for which business to bring carriers, Rivera is optimistic about the market, which he believes may be turning around—even in the admitted space.

“We’re having a lot of calls right now with companies that want to reopen, they want to give us the opportunity to write auto insurance now, which for the last year or so, it’s been very difficult to do, especially on a standalone,” he said.

The signs he’s seeing lately are making him optimistic that a market improvement may be ahead of where things appear to be currently, continuing some positive signs he said he started seeing before the Los Angeles wildfires in January.

“I thought the market was already correcting itself,” he said. “I was already in discussions with two or three different insurance companies that wanted to create an ultra-high net worth presence in California.”

Commercial/Alternative

Commercial property brokers are also dealing with the problems with wildfire-prone California and its insurance market.

Mike Prindle, head of complex property at CAC Specialty, has had to search ever farther and wider to get his clients insurance coverage.

“I’ve seen more in the last year or so, sometimes for us as brokers, we have to come up with alternative solutions to cover our clients for wildfire,” Prindle said. “That could be parametric, that could be cat bonds, it could be other alternative risk vehicles. So, we are seeing a little bit of a take-up on the client side for purchasing things like that that are sort of outside of traditional property insurance.”

The appetite for alternatives depends on the size of his client’s needs and what value they offer to carriers.

Carriers are more willing to provide coverage to commercial property owners with exposure all across the U.S.—a part which may be in wildfire-prone areas of California— with, for example, $10 million or more in annual insurance spend, he said.

“You’re going to get carriers more apt to provide the coverage, just because there’s enough premium in the overall program to cover them for that risk,” Prindle said.

But for those clients with one or two assets that may be considered a smaller or middle-market placement paying, for example, $200,000 for property insurance, with some exposure in riskier areas of California? Prindle is seeing those risks getting shunned by carriers.

Some of these smaller commercial properties are accessing the California FAIR Plan, which beefed up its commercial coverage after California Insurance Commissioner Ricardo Lara in March approved a filing from the insurer of last resort to increase commercial property coverage limits. The approval increased the FAIR Plan’s Division I Commercial Property coverage limits to $20 million per building, with a total $100 million maximum limit per location.

Beside going into the FAIR Plan, Prindle is also getting more inquiries from his smaller clients about parametric insurance.

He has seen a growing number of capital providers in the parametric space, making quotes easy to turn around. But it’s an expensive alternative. Currently a small percentage of those clients with small- to mid-size risks are buying parametric products, “but we definitely have seen an increase in the take0up rate in the last year-and-a-half, specifically for wildfire risk,” Prindle said.

Rate Hikes & L.A. Wildfires

The pain inflicted on California’s property market has grown steadily in the last few years after a series of devastating wildfire seasons—CalFire data show that seven of the state’s 10 most destructive wildfires have occurred in the last 10 years. That trend has been followed by numerous carriers pulling back from writing new policies in the state and seeking large rate hikes.

The L.A. wildfires made things worse. The blazed destroyed more than 16,000 structures and killed 30 people. Estimated insured losses from the L.A. wildfires range between $30 and $35 billion.

Several big carriers, including State Farm, Allstate, Farmers, and Mercury, reported paying more than $1 billion in claims from the wildfires. One of those companies is State Farm, which as of mid-June reports show it had received 12,855 total claims related to the fires and paid out more than $3.96 billion.

State Farm, which insures roughly one-in-five California homeowners, has asked for a large rate hike, based partly on the carrier’s massive losses from the fires.

The carrier upped its rate request in May, a week after getting the OK for a large rate hike to what the company had originally wanted before being rejected and agreeing to an interim deal for an increase. The wildfire-bitten insurer got approval for a 17% rate increase following billions of dollars in losses from the Los Angeles wildfires and pullback on writing new policies in the state.

A report from a climate activist group says State Farm’s rate increases would cost the average California homeowner more than $1,000. An analysis from the Center for Climate Integrity says that if the additional increase is approved, the average California policyholder will be paying $1,015 more for homeowners insurance in 2026 than they did in 2023.

Fixes in the Works?

Insurance regulators continue to take steps in an attempt to deal with the state’s wildfire and insurance crisis. Lara about two weeks ago talked about some of the changes during his testimony before the Assembly Insurance Committee during an informational oversight hearing.

Among those steps, the California Department of Insurance is enabling carriers to factor catastrophe modeling into rates, taking the state way from a rate-setting process that limited carriers to primarily using historical data, as well as streamlining rate filing reviews, making changes to the FAIR Plan and allowing reinsurance to be considered in rate-making.

These steps fall under Lara’s so-called Sustainable Insurance Strategy, which he and the CDI have been rolling out over the past year.

“My department has made tremendous strides these past several months in implementing my strategy,” he told the committee.

The changes also require reforming or eliminating the state’s primary property/casualty insurance law, Proposition 103, passed by voters in 1989. Calls are growing to change or scrap the law. Lara has also pushed for changes to Prop 103, while pushing back against consumer advocates who uphold the law for its protections for insurance consumers and keeping rates low.

During his committee testimony, Lara called out both consumer advocates, such as Prop. 103 proponent Consumer Watchdog, and the insurance industry for making it difficult to make changes to adapt to a new reality in the wildfire-prone state.

“Some groups, namely Consumer Watchdog along with those in the insurance lobby, have carved out power in a decades-old system that rewards gridlock, where being loud has often mattered more than being effective,” he stated to the committee.

Consumer Watchdog has been working to draw attention to the impact the group feels the changes will have on consumers, and the group has been battling some of the changes in court.

The group’s primary point of caution has been that the changes will hurt consumers. Consumer Watchdog may find some evidence in that argument following a move from Lara and the CDI in February, when he approved a request from the FAIR Plan to get money from insurers to help pay customer claims from the L.A. fires, enabling $1 billion to be collected from carriers in California to keep the FAIR Plan solvent.

Consumer Watchdog flied a lawsuit over the move, arguing that because of that decision, homeowners across the state are on the hook to pay up to $500 million of the $1 billion FAIR Plan assessment.

A lawsuit from the group challenges the way the FAIR Plan recovers costs, claiming the current system ushered in as part of several changes made by California Insurance Commissioner Ricardo Lara is unfair.

A judge also recently ruled that the California FAIR Plan’s smoke-damage policy violates state law, while in another matter a lawsuit from Consumer Watchdog is drawing concern from insurers that it could push the California insurance market closer to collapse after a Los Angeles County judge ruled that by denying coverage for clean-up and remediations, the FAIR Plan is violating state law.