Senate Bill 876, the Disaster Recovery Reform Act, requires insurers to submit disaster recovery plans for CDI review and doubles penalties for fair claims practice violations during declared emergencies. The legislation also expands additional living expense limits by 100%, requires replacement cost payments with interest, and mandates extended replacement cost coverage options and building code upgrade coverage at rebuild.

California homeowners face continued rate pressure in 2026 as reinsurers increasingly differentiate between lower-risk and high-risk regions, with wildfire and flood-prone areas experiencing elevated capacity constraints and pricing. The record-wet November conditions are reinforcing flood and mudslide risk models, likely to influence overall rate levels and non-renewal decisions in the most exposed areas.

A suite of new California insurance laws took effect January 1, 2026, requiring insurance companies to pay 60% of contents coverage limits (capped at $350,000) when customers lose their home in a qualifying disaster. The legislation focuses on promoting wildfire safety and consumer protections, increasing transparency and customer convenience across the state.

Farmers Insurance eliminated its 9,500 monthly policy cap in California and plans to expand underwriting to approximately 300,000 consumers in distressed areas in early 2026, crediting the decision to Insurance Commissioner Ricardo Lara’s Sustainable Insurance Strategy. The move signals growing confidence in regulatory reforms aimed at encouraging carriers to expand their presence in the troubled market.

Fitch projects that US property-casualty insurers will face increased competition and downward pricing pressure in 2026, with the Los Angeles wildfires causing $40 billion in insured losses and $53 billion in economic losses—making it the largest wildfire loss in US history. Regional and mutual insurers retained most of these losses as the events did not trigger excess-of-loss reinsurance coverages for larger carriers.