By Tran Nguyen | The Associated Press

Hundreds of thousands of California homeowners who have failed to find or lost access to home insurance as wildfires in the state become more destructive could once again be able to purchase policies under a state regulation announced Monday.

The rule will require home insurers to offer coverage in fire-risk areas if they want to take advantage of a new incentive that will allow them to charge customers more, something the state has never done, Insurance Commissioner Ricardo Lara’s office said in a statement. Insurers would have to start increasing their coverage by 5% every two years until they hit the equivalent of 85% of their market share. That means if an insurer writes 20 out of every 100 state policies, they’d need to write 17 in a high-risk area, Lara’s office said.

The requirement will take effect within 30 days, though it’s unclear when insurers might significantly expand coverage.

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In recent years, major insurers such as State Farm and Allstate have stopped writing any new policies in California due to fears of massive losses from wildfires and other natural disasters.  

“Californians deserve a reliable insurance market that doesn’t retreat from communities most vulnerable to wildfires and climate change,” Lara said in a statement. “This is a historic moment for California.”

In exchange for agreeing to expand coverage in fire-risk areas, insurers will be able to pass along their own reinsurance costs to consumers. Insurance companies buy reinsurance — essentially insurance for insurers — to manage their losses in the event of catastrophic wildfires or other major disasters.

If providers decide to write more policies in risky areas, they will also be able to consider climate change when setting their prices under a different rule taking effect this week. Both reforms are part of an effort to persuade insurers to continue doing business in the nation’s most populous state.

Areas where insurers would be expected to expand coverage include vast swaths of the North and Central coasts, the Sierra Nevada Mountains and most of far Northern California, and in the greater Bay Area, Marin, Napa and Santa Cruz counties, a portion of the East Bay hills, as well as parts of San Mateo and Sonoma counties and a sliver of Santa Clara County.

Insurers would also have to offer new policies for fire-risk homes in more urban areas such as the Oakland Hills and Los Gatos. The California Department of Insurance expects to make slight updates to the required coverage areas in early 2025.

A consumer advocacy group said the reforms will allow insurance companies to drive up home insurance rates by 40% to 50% and lack the teeth to enforce a substantial expansion in wildfire coverage. “There is no opportunity for public comment, as it was issued on an emergency basis,” Consumer Watchdog said Monday.