In an effort to address the state’s insurance crisis, California now plans to join all other U.S. states in allowing insurers to use catastrophe modeling when they set their rates.  Insurers in California today are only allowed to use historical catastrophe data when setting premiums.  Whether this news has any influence on State Farms’ recent decision to non-renew (cancel) homeowners insurance on 72,000 California homes remains to be seen.

Catastrophe modeling would incorporate both historical data as well as projected losses based on scientific information that considers frequency, severity, damage and loss from wildfires, according to the draft regulation.  Insurance Commissioner Ricardo Lara told reporters Thursday that the regulation will bring more reliable rates; “greater availability” of insurance; and allow mitigation efforts to be rewarded through rates.

Insurance department staff said greater availability of insurance would result in a reduction in enrollments in the FAIR Plan, which is supposed to be an insurer of last resort but for many state homeowners has become the only option for fire insurance. This week, FAIR Plan President Victoria Roach told lawmakers that the plan wrote a record 15,000 policies in February.  Hopefully some of the insurance companies that left the State will return, which should increase competition.

Thanks to CalMatters with this story.