The news: California’s state-backed FAIR Plan—the insurer of last resort for homeowners who can’t get private coverage—is raising premiums an average 30% starting in October 2026, per The California Post. 

• About half of policyholders will see 30% to 50% increases
• Some high-risk homeowners could see 50% to 200% increases

Zoom in: The increase follows nearly $4 billion in wildfire-related claims from the Palisades and Eaton Fires, one of the costliest natural disasters in recent US history.

This also reflects growing stress in California’s homeowners insurance market. Enrollment in the state-backed option has nearly doubled since 2023 as major insurers pulled back from California or stopped writing policies in high-risk areas.

Why this matters: This rising expense has larger implications across the insurance and financial markets:

• In late 2025, McKinsey estimated California had a $1.35 trillion to $2 trillion gap between wildfire exposure and available insurance capacity, increasing the risk of nonrenewals and homeowner “lock-in.” When premiums rise even more, this gap will grow.
• Banks are reducing mortgage lending in wildfire-prone areas as insurance becomes harder and costlier to secure, per The Washington Post. This puts even more strain on the housing market.
• A 2025 study by Cornell University found meaningful home-price declines after wildfire events, suggesting insurance/climate risk is starting to affect housing liquidity and valuations.

These factors also mean that Californians feel pressured to move out of state or stay in their insured homes for risk of losing coverage.

Implications for insurers: The remaining traditional carriers will likely continue shrinking their exposure in high-risk areas by limiting new policies, not renewing customers, or tightening underwriting standards. However, insurers don’t necessarily want to abandon California altogether, given its size and importance. Instead, many are trying to retain lower-risk customers while reducing concentration in wildfire-prone regions through more granular risk modeling and mitigation requirements.

At the same time, because the FAIR Plan is funded by participating insurers in California, carriers can still face financial exposure if the Plan experiences major deficits. In other words, insurers cannot fully escape California wildfire risk simply by exiting high-risk markets. The broader fear is a negative feedback loop in which worsening wildfire risk drives insurer retreat, pushes more homeowners into the FAIR Plan, weakens housing-market stability, and ultimately creates even greater financial and political pressure on the remaining insurers. To minimize risk, we still recommend integrating advanced climate risk modeling with parametric insurance.

This content is part of EMARKETER’s subscription Briefings, where we pair daily updates with data and analysis from forecasts and research reports. Our Briefings prepare you to start your day informed, to provide critical insights in an important meeting, and to understand the context of what’s happening in your industry. Non-clients can click here to get a demo of our full platform and coverage.