AB 2724

AB2724:v98#DOCUMENT

Bill Start

CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION

Assembly Bill

No. 2724

An act to add Article 12.5 (commencing with Section 979) to Chapter 1 of Part 2 of Division 1 of the Insurance Code, relating to insurance.

LEGISLATIVE COUNSEL'S DIGEST

AB 2724, as amended, Bauer-Kahan. Catastrophe modeling: distressed areas.

Existing law creates the Department of Insurance, headed by the Insurance Commissioner, and generally regulates the business of insurance in the state. Existing law establishes the California FAIR Plan Association, a joint reinsurance association in which all insurers licensed to write basic property insurance participate to administer a program for the equitable apportionment of basic property insurance for persons who are unable to obtain that coverage through normal channels. Existing regulations authorize insurers, in distressed areas and for properties insured by the FAIR Plan that are exposed to wildfire risk, to use catastrophe modeling, as specified. Under existing regulations, a distressed area includes undermarketed ZIP Codes and distressed counties.

For purposes of using catastrophe modeling in insurer commitments, this bill would state that a distressed area includes only undermarketed ZIP Codes. The bill would provide that an undermarketed ZIP Code is a ZIP Code, as determined by the commissioner, that, among other things, has at least 10% of the sum of residential properties in the ZIP Code that are insured by the FAIR Plan, as specified. The bill would require the department to review and revise any regulations as necessary to implement these provisions.

This bill, on or before July 1, 2027, and yearly thereafter, would require the department to review and update distressed areas. As part of the review and update, the bill would require the department, among other things, to hold at least one public meeting to allow interested persons to submit suggestions for distressed areas, as specified. The bill, on or before January 1, 2028, and yearly thereafter, would require the department to publish a bulletin with a list of ZIP Codes in distressed areas on its internet website and to provide this information to certain committees in the Legislature.

Digest Key

Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO

Bill Text

The people of the State of California do enact as follows:

SECTION 1.

The Legislature finds and declares the following:

(a) The Sustainable Insurance Strategy (SIS) regulations issued by the Department of Insurance mark meaningful progress toward improving insurance availability and market stability across California.(b) Building on this foundation, there is an opportunity, however, to further enhance these regulations to ensure that all communities—especially those facing elevated wildfire risk—are fully supported.(c) Reviewing and refining the use of percentage-based thresholds could help better capture the unique challenges experienced by wildland-urban interface (WUI) communities. By more directly addressing the realities these areas face, the SIS can more effectively respond to the impacts of the current insurance landscape.(d) WUI communities have shown resilience despite experiencing a high number of nonrenewals, cancellations, and limitations in wildfire coverage. Aligning the definition of distressed areas with on-the-ground realities can ensure that homes currently on the FAIR Plan are appropriately accounted for. This would help close existing gaps and improve coverage in some of California’s most wildfire-prone communities.(e) By building on the progress already made, these targeted enhancements can help create a more inclusive, resilient, and effective insurance framework for all Californians.

SECTION 1.SEC. 2.

Article 12.5 (commencing with Section 979) is added to Chapter 1 of Part 2 of Division 1 of the Insurance Code, to read:

Article 12.5. Catastrophe Modeling

979.

(a)For purposes of using catastrophe modeling in insurer commitments pursuant to Section 2644.4.8 of Title 10 of the California Code of Regulations, a distressed area shall include only undermarketed ZIP Codes.

(b)For purposes of this section, “undermarketed ZIP Code” means a ZIP Code, as determined by the commissioner, that at least partially overlaps a high or very high fire hazard severity zone as shown on current maps published by the Department of Forestry and Fire Protection and in which the ZIP Code has at least 10 percent of the sum of the following that are insured by the FAIR Plan:

(1)The number of residential properties in the ZIP Code that are insured by the FAIR Plan.

(2)The number of residential properties in the ZIP Code that are insured in the voluntary market by admitted insurers under a policy of qualifying residential property insurance.

(c)The commissioner shall publish an initial bulletin containing a list of the undermarketed ZIP Codes determined under this section. The commissioner shall, by subsequent bulletins, update the list of undermarketed ZIP Codes as conditions warrant, but in any event no less frequently than once per year.

(d)The department shall review and revise regulations as necessary to implement this section.

979. (a) On or before July 1, 2027, and yearly thereafter, the department shall review and update distressed areas pursuant to Section 2644.4.8 of Title 10 of the California Code of Regulations.(b) As part of its review and update, the department shall, at a minimum, do all of the following:(1) Consult with the Department of Forestry and Fire Protection.(2) Consider ZIP Codes with at least 10 percent of the sum of the following that are insured by the FAIR Plan:(A) The number of residential properties in the ZIP Code that are insured by the FAIR Plan.(B) The number of residential properties in the ZIP Code that are insured in the voluntary market by admitted insurers under a policy of qualifying residential property insurance.(3) Develop and implement a process that allows for meaningful public participation that includes, at a minimum, both of the following:(A) Holding at least one public meeting to allow interested persons to submit suggestions for distressed areas.(B) Making available the proposed distressed areas described in subdivision (a) for public review and comment.(c) The department shall publish a bulletin, on or before January 1, 2028, and yearly thereafter, with a list of ZIP Codes in distressed areas on the department’s internet website and provide the information to the Assembly Committee on Insurance and the Senate Committee on Insurance.