Insurers in California Must Cough Up More For Climate Change –

The latest news from California, where the regulator is seeking to demand for admin, regulation, solvency cash set aside, plus more reports on climate related issues from the sector. Sustainable goals and resilience are great buzzwords but ultimately they translate into increased costs for insurers. Solvency regs likewise; the cash buffer required for Cat events like arson related wildfires is uncapped, nobody knows what any insurer might have to pay out.

The net (zero) result of ever increasing regs in California will be a gradual exodus of insurers, in the same way retailers have left sanctuary cities like Portland Oregon and San Francisco. Long term, maybe that’s what politicians want? It could shift the blame somehow onto “big corporate greed” or something?

Perhaps the few wealthy property and businesses left in California could form their own Lloyd’s type syndicate to mitigate some losses in the future? But would that ever get a license to quote in California? Unlikely. Difficult to see an endgame in all this frankly.

Here’s the word;

In a proactive effort to secure the financial stability of Californians, Commissioner Ricardo Lara has announced a groundbreaking regulation aimed at mitigating rising costs and safeguarding the nation’s largest insurance market from ongoing catastrophic risks and technological threats. The Long-Term Solvency Regulation will provide the California Department of Insurance with enhanced oversight tools to protect from risks that may arise in the coming years or even decades.

“Regulators around the globe are facing significant challenges due to rapidly changing climate conditions, which impact market stability and affect both affordability and availability. Technological advancements are advancing faster than our departmental resources, highlighting the shortcomings of our outdated regulatory frameworks,” said Commissioner Lara. “In this rapidly evolving landscape, we must expect the unexpected. It is crucial to anticipate future risks to improve preparedness and mitigation efforts, as well as to ensure that companies can meet their legal obligations to consumers.”

The Long-Term Solvency Regulation aligns with the Commissioner’s work as a member of the International Association of Insurance Supervisors (IAIS), where he contributed to the development of guidance for insurance supervisors on climate risks, as well as various reports and standards. The regulation focuses on solvency strategies and leverages the growing implementation of standardized climate risk disclosures by regulators worldwide, alongside UN-led efforts to establish the Principles for Sustainable Insurance and the Sustainable Development Goals.

In this new era of increasing risks, the role of the insurance industry must evolve from serving as a passive safety net to becoming a proactive enabler of resilience,” said Daniel Murphy, Lead Financial Services Industry Partnerships & Climate Risk and Resilience Initiatives at the World Economic Forum. “Insurance regulators can help by encouraging long-range planning to better anticipate shocks before they lead to insurance crises for consumers.”

“Managing climate risk is part and parcel of good risk management and of disaster risk reduction—but the past alone is not a reliable indicator of the future. This is why it is essential for insurers to assess different climate futures and their implications for their underwriting and investment portfolios,” said Butch Bacani, Head of Insurance at the UN Environment Programme and Chair of the UN Forum for Insurance Transition. “By insuring and investing with foresight, insurers are better positioned to enhance long-term business resilience and company value, close the protection gap, contribute to financial stability, and support the transition to safer, more resilient and sustainable communities and economies.”

“Scenario analysis is a critical risk management tool for navigating uncertainty,” said Dr. Sean Carmody, Executive Director, Policy and Advice Division of the Australian Prudential Regulation Authority, the country’s insurance regulator. “It helps institutions anticipate and prepare for emerging risks—such as the impact of a changing climate and rapid technological innovation—by exploring a range of plausible futures and identifying areas of vulnerability and strategies that can strengthen resilience in the financial system.”

The Department of Insurance released draft regulatory text and will hold a workshop on November 14, 2025, to hear input from the public.

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