EXECUTIVE DEPARTMENT
STATE
OF
CALIFORNIA
EXECUTIVE
ORDER
N-13-23
WHEREAS
in
1988,
California voters
enacted
Proposition
103,
which
established a robust set
of
consumer protections designed to
keep
insurance
rates fair
and
affordable
and
to
ensure a
competitive
marketplace;
and
WHEREAS
climate
change
has
made
California hotter
and
drier
over
the
last several
decades,
resulting
in
more frequent wildfires
of
greater
intensity;
and
WHEREAS
since
2018,
California has
experienced
the seven largest wildfires
in
state history,
as
well
as
the single deadliest
and
most destructive wildfire,
and
during
that
time wildfires
have
burned millions
of
acres
and
destroyed thousands
of
structures;
and
WHEREAS
climate
change
has increased the
occurrence
and
severity
of
winter storms,
as
evidenced
by
the
series
of
severe storms
that
battered
the
State
this
winter
and
spring,
damaging
or destroying hundreds
of
homes
and
businesses
and
threatening thousands more;
and
WHEREAS
extreme
weather
events
have
contributed
to
billions
of
dollars
in
insurance rate increases requested
by
insurance companies since
2015;
and
WHEREAS
this
year,
two
of
the State's largest insurance carriers,
representing
over
27
percent
of
the
admitted
insurance market
in
California,
announced
they
would
stop issuing
new
homeowners
and
commercial
property
insurance policies
in
California; several others, representing
another
more than
36
percent
of
the market,
announced
plans
to
limit
new
policy origination;
and
insurer-initiated non-renewals were
28
percent
higher statewide
in
2019
through
2021
than
in
2015
through
2018,
with the highest impacts
in
the
top
ten counties
with the highest wildfire
risk,
where non-renewals increased
by
158
percent
over
that
time period;
and
WHEREAS
insurers
have
cited
exposure
to
catastrophic
weather
events,
higher construction repair costs,
global
inflation,
and
greater
reinsurance
premiums, which rose
30
to
50
percent
across the country
this
summer for
carriers with catastrophe
losses,
as
the primary drivers
of
their decision
to
pull
back
from
the
California market;
and
WHEREAS
the
contraction
of
insurance options
in
the State has a
direct
negative
effect
on consumer access
to
coverage:
in
certain parts
of
the
State,
homeowners, business owners,
and
farmers are
now
unable
to
obtain
new
insurance policies from the
admitted
insurance market;
and
WHEREAS
access to insurance allows existing homeowners
to
protect
what
is
for
many
their largest
and
most important asset,
and
empowers homebuyers
to
secure a
mortgage
for a
home
that
can
build generational wealth,
but
a
scarcity
of
options
may
freeze real estate transactions
and
slow the rate
of
new
housing
development,
exacerbating
the State's critical housing shortage;
and
WHEREAS
Californians
who
cannot
obtain
wildfire
coverage
from the
admitted
market
can
apply
for protection through the California
Fair
Access
to
Insurance Requirements
(FAIR)
Plan, a state-established
risk
pool
intended
to
operate
as
California's insurer
of
last resort providing
temporary
coverage
as
consumers pursue insurance
in
the traditional market;
and
WHEREAS
steadily increasing enrollment
in
the
FAIR
Plan
as
a
percentage
of
the total
number
of
residential insurance policies
in
California
over
the past
five years, particularly
in
counties with
the
highest wildfire
risk,
where the
number
of
new
and
renewed
FAIR
Plan policies
in
2021
was more than ten times
the
tota
l
in
2018,
has
threatened
the
ongoing
stability
of
the plan;
and
WHEREAS
California has
made
historic efforts
to
curb
the devastating
effects
of
climate
change
through the California Climate Commitment,
including a record $52.2 billion investment
in
climate
action
to
address
the
biggest contributors
to
climate
change,
while also building resiliency for a future
in
which extreme
weather
events are a certainty;
and
WHEREAS
building
that
resiliency
depends
on protecting Californians'
homes
and
businesses from catastrophic
losses,
by
stabilizing the homeowners
insurance
and
commercial
property insurance markets while providing rates
that
remain fair
and
affordable
to
consumers,
and
maintaining the
ongoing
viability
of
the
FAIR
Plan, which provides a vital safety
net
to
Californians whose
policies are
cancelled
or not
renewed
and
to
homebuyers
who
cannot
secure
a
mortgage
without insurance;
and
WHEREAS
the California Insurance Commissioner has led a multi-year effort
to
increase consumer protections
and
encourage
competition
in
the
homeowners insurance
and
commercial
property insurance markets, including
promulgating first-in-the-nation "Safer from Wildfires" regulations
that
mandate
discounts
to
homeowners
and
business owners
who
engage
in
wildfire mitigation
efforts on their properties;
but
even more must
be
done
to
maintain access
to
insurance for consumers;
and
WHEREAS
the
California Insurance Commissioner has
broad
authority
under
the Insurance
Code
to
adopt
rules
to
promote
the
public welfare,
including
under
sections
1861.01,
1861.05,
and
1861.055
to
adopt
regulations
governing the prior
approval
process for insurance rate
change
applications,
and
to
adopt
emergency
regulations
under
section
11346.1
of
Government
Code
and
section
12921.7
of
the Insurance
Code.
NOW,
THEREFORE,
I,
GAVIN
NEWSOM,
Governor
of
the State
of
California,
in
accordance
with the authority vested
in
me
by
the State Constitution
and
statutes
of
the State
of
California,
do
hereby
issue
the following Order
to
become
effective
immediately:
IT
IS
HEREBY
ORDERED
THAT:
1)
The
Commissioner
of
Insurance
is
requested
to
take
prompt
regulatory
action
to
strengthen
and
stabilize California's
marketplace
for
homeowners insurance
and
commercial
property insurance,
and
to
consider
whether
the
recent
sudden deterioration
of
the private
insurance market presents facts
that
support
emergency
regulatory
action.
The
Commissioner
is
requested
to
consider the following goals
in
crafting
an
appropriate
regulatory response:
a. Expand
coverage
choices for consumers, particularly
in
underserved areas
of
the State.
b. Improve the efficiency, speed,
and
transparency
of
the
Department's rate
approval
process.
c. Tailor the rate
approval
process
to
account
for a
ll
factors
necessary
to
promote
a robust,
competitive
insurance
marketplace,
including through potential revisions
to
the
way
catastrophe
risks
and
insurer costs are
accounted
for.
•
d.
Ma
intain the long-term availability
of
homeowners
and
commercial
property insurance
coverage.
e. Maintain the solvency
of
the
FAIR
Plan
to
protect
its
policyholders
and
promote
long-term resiliency
in
the
face
of
climate
change,
including
by
identifying mechanisms
to
reduce
its
share
of
the overall market
in
underserved areas
and
move
its
customers into the
admitted
insurance market.
2)
The
Department
of
Finance
(DOF)
shall consult with the California
Department
of
Insurance
(CDI)
in
meeting
the
requirements
of
an
Economic Assessment or Standardized Regulatory
Impact
Analysis
(SRIA),
as
appropriate,
to
support the potential rulemaking described
in
Paragraph
1,
and
shall promptly review
and
comment
on
any
SRIA
submitted
in
connection
with Paragraph
1.
IT
IS
FURTHER
ORDERED
that,
as
soon
as
hereafter possible,
this
Order
be
filed
in
the Office
of
the Secretary
of
State
and
that
widespread publicity
and
notice
be
given
of
this
Order.
This
Order
is
not
intended
to,
and
does not,
create
any
rights or benefits,
substantive or procedural,
enforceable
at
law
or in equity, against the State
of
California,
its
agencies, departments, entities, officers, employees, or
any
other
person.
IN
WITNESS
WHEREOF
I
have
hereunto set
my
hand
and
caused
th Great Seal
of
the State
of
C lifornia
to
be
affixed
this
21st
day
o
eptember
2023
.
ATTEST:
SHIRLEY
N.
WEBER,
Ph.D.
Secretary
of
State
