California’s property insurance challenges are expanding beyond high-risk fire zones, now affecting new housing developments in broad valleys, including the Inland Empire. Homeowners and buyers in these areas, often without significant wildfire risk, are finding it difficult to secure traditional comprehensive insurance policies.
One such case involves Alex Hwang, who faced complications purchasing a $700,000 new home in a development in the Inland Empire. Despite the project being on a scrubby hill, distinct from steep timber and chaparral areas prone to destructive fires, the builder’s agents could not secure a comprehensive home policy in the standard, regulated market. The policies found excluded essential fire coverage required by most lenders.
Hwang's options narrowed to purchasing partial protection from the FAIR Plan, the state’s insurer of last resort, which covers only fire, and then finding a second policy for other coverage. Alternatively, he could turn to the surplus lines market, consisting largely of out-of-state carriers that specialize in high-risk insurance, sold without price controls or state backing. Hwang ultimately chose a surplus line policy, which included a $25,000 deductible for fire losses, five times higher than a standard deductible. "I hate the $25,000, but I didn’t really have a whole lot of choice," Hwang said, noting that "None of the big-name insurance companies were writing."
An investigation found that during his first four years in office, Insurance Commissioner Ricardo Lara failed to address the impending property insurance contraction that led to thousands of Californians losing coverage. Data obtained under public records requests shows that conventional property insurance continues to grow scarcer across large areas of the state, including the Inland Empire, where FAIR Plan enrollment is surging.
A data analysis indicates that the FAIR Plan, while stable in high-risk areas, is growing rapidly across the state in places of low to moderate fire risk. In 396 ZIP Codes, state insurance plan data shows that 9 out of 10 policies added to the FAIR Plan between March 2025 and June 2026 were for properties deemed low-risk. These 11,000 new low-risk homes joined 138,000 similar properties already covered by the insurer of last resort after being rejected by the regulated market.
In low to moderate risk areas, such as along the edges of flat valleys and lazy hills, FAIR Plan growth is significant, with policies now underwriting new suburban development. Along the Interstate 215 corridor, known for affordable housing, FAIR Plan policy counts have jumped 300% to 500% over the last year. Major carriers are now refusing to insure even low-risk properties with minimal fire danger.
This situation presents a dilemma for homeowners already contending with California’s high cost of living. They must choose between the FAIR Plan, which offers only partial protection, or the unregulated insurers now entering the market. Policies from the latter are not regulated by the state’s insurance department regarding rates or consumer complaints. Furthermore, if a surplus lines company goes bankrupt, its policyholders have no backup coverage from the state.
Weiss Ratings, an independent financial research company, reports that surplus lines carriers now comprise 7% of the California home insurance market, a notable increase from 1% in 2021. Hwang described his policy as "no-name insurance," expressing discomfort but acknowledging limited options.
The state has been in an insurance market contraction for seven years, with regulated carriers freezing business or dropping large blocs of policies. These carriers have argued they could not raise rates quickly enough to cover spiraling costs, including labor and construction for post-wildfire rebuilding. The market distress peaked in 2024, with State Farm and Farmers announcing plans to drop tens of thousands of customers, and other major insurers ceasing to accept new clients.
Despite this, Insurance Commissioner Ricardo Lara testified to the state Assembly in June, stating, "We are finally seeing the signs of stabilization in our insurance market," citing a slowdown in monthly FAIR Plan entries. However, the data obtained under public records requests suggests a continued scarcity of conventional property insurance, especially in regions like the Inland Empire, where FAIR Plan enrollment continues to soar. Near Menifee, where Hwang purchased his home, FAIR Plan policies grew fivefold from 2024 to this past June. In Hemet, policies grew by 660%, with over 1,100 new policies from a single ZIP Code, areas characterized by sparse vegetation like coyote brush and sage, not forests.
Insurance brokers, real estate agents, and homeowners report a surge in the sale of unregulated policies due to the lack of conventional property insurance. Annual reports filed with the National Assn. of Insurance Commissioners show a steep increase in premiums collected by surplus lines companies in California. Allstate, for example, stopped writing new business through its regulated carrier in 2022 while doubling its unregulated line, North Light Specialty. Some of these surplus lines companies originate from hurricane-prone Florida, where thinly capitalized insurers have frequently failed.
