The California Government has launched a series of executive actions that will allow insurers to consider climate change and other future risks when assessing a property’s rate in a move aimed at addressing the state’s ongoing insurer exodus crisis.  

The actions come after seven of California’s 12 major insurers, including AIG, Allstate and State Farm, pulled out of the state’s market, saying the cost of wildfires and other severe weather events drove up expenses beyond capacity.  

California Insurance Commissioner Ricardo Lara says the actions, which have been approved via executive order from Governor Gavin Newsom, mark the state’s most significant insurance reform in over three decades.  

“We are at a major crossroads on insurance after multiple years of wildfires and storms intensified by the threat of climate change,” Mr Lara said.  

“I am taking immediate action to implement lasting changes that will make Californians safer through a stronger, sustainable insurance market.”  

The changes will allow insurers to assess business and residential properties’ future risk outlook when determining pricing evaluation, a shift from previous requirements, which only allowed insurers to consider past events occurring at the property.  

The government says the changes, which it admits may likely lead to increased premiums, will be balanced with a required commitment for insurers to cover no less than 85% of their statewide market share in areas considered at high risk of wildfires, as well as a recognition of wildfire mitigation tactics when assessing rates.  

“It is critical that California’s insurance market works to protect homes and businesses in every corner of our state,” Mr Newsom said.  

“A balanced approach that will help maintain fair prices and protections for Californians is essential.” 

The executive actions will also increase the government-funded FAIR Plan commercial coverage limit to $US20 million ($31.12 million). The scheme ensures coverage for homes and personal belongings impacted by fire and smoke damage from wildfires and other structure fires.