Last spring, tech worker Alex Hwang and his wife decided to trade their small house in the pricey San Francisco Bay Area for a big backyard and a new six-bedroom house in Pulte’s Cimarron Ridge development in the Inland Empire, the epicenter of the state’s push to build affordable housing communities.
The couple was in the midst of buying the new $700,000 house in June, when a complication arose. Pulte normally provides an insurance policy as part of the sale package. Hwang’s real estate agent said getting coverage in the development had never been a problem. The project was on the side of a scrubby hill that looked nothing like the steep timber and chaparral where California’s destructive fires burn and the insurance market has fled.
But as the closing date drew near, the builder told Hwang that its agents could not locate a comprehensive home policy in the standard, regulated insurance market. What it did find for Hwang excluded the fire coverage most lenders require.
Hwang’s only options were to buy partial protection from the insurer of last resort known as the FAIR Plan, which covers only fire, and pay again for a second policy to cover everything else. Or Hwang could venture into the more flexible surplus lines market, made up of largely out-of-state carriers that specialize in high-risk insurance sold without price controls or state backing. He hadn’t known that such a secondary unregulated market even existed.
With the closing date pressing in, Hwang opted to buy an insurance policy from a surplus line carrier, but it had a hitch. To bring down the cost, the policy contained a clause that, if there was a fire, Hwang would be required to take on $25,000 in losses out of his own pocket — five times higher than the standard deductible.
“I hate the $25,000, but I didn’t really have a whole lot of choice,” Hwang said. “None of the big-name insurance companies were writing.”
Hwang’s dilemma is widely shared.
California’s property insurance deserts are spreading, moving down from the overgrown timbered slopes at risk of Sierra wildfires and into the broad valleys crowded with vast tracts of new housing developments, sometimes with no major risks from wildfire losses.
A Times data analysis shows the FAIR Plan has plateaued as the primary insurance provider in high-risk areas — the coastal canyons and the Sierra Nevada slopes that have witnessed California’s worst wildland fires — and is now growing rapidly across the state in places of low to moderate fire risk, places such as the Inland Empire.
In 396 ZIP Codes, 9 out of 10 policies added to the FAIR Plan between March 2025 and the end of June 2026 were deemed by the state insurance plan to actually be low-risk, its own data show. These 11,000 homes came on top of the 138,000 low-risk homes already covered by the insurer of last resort, properties that have been rejected by the regulated market.
In places at low to moderate risk of fire, along the edges of flat valleys and lazy hills, growth in the FAIR Plan is ballooning, and it is being used to underwrite new suburban development.
The Interstate 215 corridor is the arterial mainline of California affordable housing, bristling with so many expanding housing developments that demand is outpacing what’s available in the traditional insurance market. In places like these, The Times found, FAIR Plan policy counts over the last year have jumped 300% to 500%.
Major carriers from large swaths of the state are now refusing to insure even low-risk properties with minimal danger of burning. The pullback poses a dilemma for homeowners already struggling with California’s infamously high cost of living.
They must choose between two bad options: the FAIR Plan that offers only partial protection, or risk their homes with one of the unregulated insurers now rushing in to capitalize on the California crisis.
Because policies from the latter are sold outside of the regular market, the state’s insurance department cannot regulate their rates or investigate complaints from consumers. And if a surplus lines company goes bankrupt, its policyholders have no backup coverage from the state of California.
According to Weiss Ratings, an independent financial research company, surplus lines carriers now account for 7% of the California home insurance market, up from 1% in 2021.
“I call it ‘no-name insurance,’ because I have never heard of these people,” Hwang said.
Hwang’s policy was sold by a Nebraska startup, Summit Specialty, with no track record in paying for California risks, capitalized by a private equity fund whose investment portfolio includes mail-order steak. The company did not immediately respond to a request for comment.
Summit Specialty carries an A rating from the insurance rating company AM Best, but with a negative outlook. Should it fail, Hwang will have no protection from the California guarantee fund that backs regulated carriers.
“I can’t say that I’m very comfortable, but in this market, we’re very limited,” he said. “You either pay … or you go into the FAIR Plan.”
The state is seven years into an insurance market contraction, with regulated carriers freezing business or dropping large blocs of policies. They argued they could not raise rates fast enough to keep pace with their own spiraling costs, including the price of labor and construction to rebuild after wildfires.
The market distress peaked in 2024 with State Farm and Farmers announcing plans to drop tens of thousands of customers, and other major insurers turning away all new customers.
Insurance Commissioner Ricardo Lara in June testified to the state Assembly that the worst of California’s insurance retreat was over.
“We are finally seeing the signs of stabilization in our insurance market,” he said, citing a slowdown in the number of policies each month entering the California FAIR Plan.
But the Times analysis of data obtained under public records requests shows that conventional property insurance continues to grow more scarce across large areas of the state, including the Inland Empire, where FAIR Plan enrollment is soaring.
Near Menifee where Hwang bought his home, FAIR Plan policies grew fivefold from 2024 to this June. Across the valley in Hemet, the plan grew by 660%, with more than 1,100 new policies emanating from a single ZIP Code.
The burnable vegetation on the sparse landscapes surrounding these homes is coyote brush and sage, not forest.
The growth of an unregulated market
Due to the dearth of conventional property insurance, insurance brokers, real estate agents and homeowners said, there is a surge taking place in the sale of unregulated policies.
Annual reports filed with the National Assn. of Insurance Commissioners show a steep jump in the California premiums collected by surplus lines companies.
Leading this secondary market is Allstate, which in 2022 stopped writing new business in California through its regulated carrier, while doubling the business of its unregulated line, North Light Specialty. Others include companies out of hurricane-prone Florida, where thinly capitalized insurers regularly collapse. Surplus lines companies are now pushing to be able to assume policies directly from the FAIR Plan.
California’s insurance department has had a mixed response to this expansion.
Lara’s deputy commissioner, Josephine Figueroa, in March suggested to lawmakers to make it easier for surplus line companies to solicit business from FAIR Plan policyholders.
But a few months later, Lara’s spokesman Michael Soller said the insurance commissioner remains “focused on expanding access to comprehensive coverage, not skinny policies that promise savings but don’t deliver full protection.”
Nonetheless, without the surplus lines stopgap, home construction would be hobbled, experts said.
“I’m considering these specialty companies the homeowners’ hero,” said Gilbert Ayon, an Inland Empire insurance broker who owns Turn2 Insurance Services. “They have been my go-to for so many homeowners policies.”
Louis, a Riverside County resident who asked that his last name not be used, says he and his wife found themselves in a desperate situation earlier this summer when they couldn’t find insurance that their lender required to buy a $700,000 single-family home in Promontory, a master-planned community east of Murrieta.
“We were panicking,” Louis said.
Regulated carriers wouldn’t write them a policy. Surplus lines companies quoted prices twice what they had expected to pay, and even then often excluded fire protection. He even turned to Reddit for suggestions, where community pages across the Inland Empire are filled with users searching high and low for an affordable home insurance policy.
“We tried our best to do everything, and when we kept getting denied, we just looked at each other like, ‘OK, what’s gonna happen if we can’t find something we could afford?’ ”
Ultimately, the couple settled on one of the less-expensive surplus lines policies, from Indiana-based Orion180 that came with a hefty $14,000 deductible for fire losses. The fast-expanding carrier, four years old but operating in at least 30 states, is heavily dependent on the price-volatile international reinsurance market, according to the Kroll Bond Rating Agency.
“People always talk about how unaffordable California is as a state …. so here’s another thing to tack onto that,” Louis said. “Can you afford a home? Great. Can you afford the insurance?”
There are fewer traditional home insurance policies written in California than at any point in the last 15 years, according to state data reviewed by The Times.
Since the market peaked in 2016, 1,300 ZIP Codes in the state have lost 462,000 policies, the Times analysis found.
Put another way: For every additional home insurance policy written in the last decade, the California market has lost nearly two policies somewhere else.
Riverside insurance broker Bob Severns has carved out a niche helping homebuyers find coverage in this fractured market.
“Insurance used to be the last thing that everybody did when they bought a house: ‘Oh, I gotta get insurance. OK, give me like three days,’” Severns said. “And now? Now it’s the first thing.”
He’ll find a policy, he said. The challenge is whether the buyer can afford it.
The post ‘We were panicking.’ How homebuyers in low-risk fire areas are being hit by property insurance crisis appeared first on Los Angeles Times.
