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RiversideCA.gov
WORKSHOP: INSURANCE CRISIS UPDATE & PROPOSED RESOLUTIONCity CouncilOctober 22, 2024City Manager’s Office RiversideCA.gov2
•Led by Insurance Commissioner Ricardo Lara•Regulates the insurance industry in California•Protects consumers and ensures fair marketplace practices•Key roles: licensing, rate approval, handling complaints BACKGROUND - CDI California Department of Insurance (CDI)1
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•Requires CDI approval for rate increases over 7%•Requires historical data usage for rate setting (unique to California) •Gives insurance companies the legal right to choose where they write policiesBACKGROUND – PROP 103 1988 Legislation that provides framework of consumer protections:
RiversideCA.gov4
•Backed by all insurance companies•Provides insurance for property owners in high-risk areas•Intended as last resort option for those unable to find traditional coverageCALIFORNIA FAIR PLAN-LIMITATIONS-Higher cost Fire insurance onlyLower coverage limits 3 4
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1. High premiums and lack of coverage options2. Major insurers halting policy writing 3. Over 100,000 Californians lost coverage (2019-2024)4. Increasing reliance on FAIR Plan (3% of total market)CURRENT INSURANCE CRISISKEY ISSUES RiversideCA.gov6
•15,923 policyholders denied renewal 2015-2021•FAIR Plan policies 27% 2020-2022•Failed to meet thresholds for moratoriums or low-interest loans for fire recoveryRIVERSIDE IMPACTS 5 6
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Rising Reinsurance PremiumsREASONS FOR INSURANCE CRISIS Regulatory Constraints (Prop 103)Increased Wildfire RisksInflation RiversideCA.gov8
Increasing FAIR Plan exposure creates financial risk for entire market – risk of insolvency if catastrophic loss occurs CHALLENGES1. Long approval process for rate increases2. Insurers constrained by reliance on historical data for rate settingREGULATORY BURDENSFAIR PLAN EXPOSURE7 8 10/10/2024
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Executive Order N-13-23 (2023): Governor called for immediate action to stabilize insurance market. Sustainable Insurance Strategy: 1. Require insurers to cover 85% in high wildfire risk areas2. Transition FAIR Plan policyholders back to traditional plans 3. Modernize rate-setting to forward-thinking models STATEWIDE EFFORTS*In effect by December 31, 2024 but expected to take 2 years for insurance market to react.
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Safer from Wildfire Program: CDI initiative to encourage property owners to implement fire-resistant measures, reducing risk and improving insurability. WHAT CAN WE DO? Requires insurance companies to provide discounts for those who implement fire mitigation measures. 9 10 10/10/2024
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Class-A Fire Rated RoofFIRE MITIGATION MEASURES 5-foot Ember-Resistant ZoneNon-Combustible Materials 6 inches bottom Exterior WallsDefensible Space ComplianceMulti-Paned WindowsEnclosed EavesRemoval of combustible Sheds & Structures within 30 feetClearing vegetation & debris near structure RiversideCA.gov12
The California Insurance Commissioner has broad authority under the Insurance Code to adopt emergency regulations to promote the public welfare and to adopt emergency regulations governing the prior approval process for insurance rate change applications.STATE ADVOCACY – DRAFT RESOLUTION The draft Resolution calls for the Insurance Commissioner, State Legislature, and the Governor to declare a state of emergency to take immediate regulatory action to stabilize the property insurance market. 11 12 10/10/2024
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Goal 2.6 –Strengthen community preparedness for emergencies to ensure effective response and recovery. STRATEGIC PLAN ALIGNMENTCommunity Trust Equity
Fiscal Responsibility
Innovation
Sustainability & Resiliency
City of Riverside Strategic Priority No. 2Community Well-Being RiversideCA.gov14
That the City Council:1. Receive and file an update on the current California insurance crisis; and2. Conduct a workshop on the proposed Resolution and provide further direction relating to the insurance crisis in Riverside. RECOMMENDATIONS13 14 10/10/2024
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That the City Council:1. Receive and file an update on the current California insurance crisis; and2. Discuss the proposed Resolution and provide further direction or recommend that they Resolution be forwarded to the Safety, Wellness, and Youth Committee for further consideration. RECOMMENDATIONSQuestions?15