California Certifies Verisk’s Wildfire Catastrophe Model: A Milestone for Risk-Based Insurance Reform

RIA Staff
RIA Staff
on Mon, 08/04/2025
California Certifies Verisk’s Wildfire Catastrophe Model: A Milestone for Risk-Based Insurance Reform

The California Department of Insurance (CDI) has approved Verisk’s Wildfire Model for the United States, making it the first-ever catastrophe model authorized for insurance ratemaking under the state’s new Sustainable Insurance Strategy.

This landmark approval signals a significant shift away from historical-loss-based insurance pricing. Instead, insurers may now use scientifically validated, forward-looking risk models to assess wildfire exposure and set rates in the wildfire-prone state.

“This is a transformative moment for the insurance industry and for California homeowners and businesses,” said Rob Newbold, President of Verisk’s Extreme Event Solutions, in Verisk’s announcement.

Why It Matters to the Restoration Industry

California has faced a growing insurance crisis as major carriers pulled coverage from high-risk wildfire zones. Homeowners increasingly turned to the FAIR Plan, California’s last-resort insurer, due to unaffordable or unavailable private insurance.

Now, with Verisk’s model certified, insurers can account for:

  • Individual property- and community-level mitigation efforts
     
  • Climate-informed wildfire probabilities
     
  • Geographic, structural, and vegetative risk data
     

This transition will help insurers restore market stability and return to underserved areas, a key requirement of the CDI’s strategy: insurers must now write at least 85% of their statewide market share in wildfire-distressed ZIP codes.

"We commend Commissioner Lara for his leadership... This is an important step toward stabilizing the state’s insurance market amid growing climate threats,” said Mark Sektnan, VP of Government Relations at APCIA, in Insurance Business Magazine.

What RIA Is Watching

As insurers begin adopting the Verisk model:

  • Will risk-based premiums become more predictable and equitable?
     
  • How will this impact restoration scopes, policy coverage, and rebuild standards?
     
  • Will future catastrophe model approvals follow suit?
     

RIA will continue to monitor how these regulatory shifts affect member companies, policyholders, and disaster-prone communities.

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