Before the L.A. fires, a crisis that wasn't handled

California's insurance chief failed to head off a looming contraction

- PAIGE ST. JOHN

California's property insurance market was unraveling fast in mid-2023 when the state's insurance commissioner, Ricardo Lara, landed in Bermuda for four days of elbow-rubbing with industry figures.

The state's largest carriers were dumping customers by the tens of thousands and refusing to write new policies across large swaths of the state. Insurers cited inflation, soaring reinsurance costs and inadequate rate hikes, with one national insurer threatening to leave California altogether if Lara didn't make things right.

Lara was in Bermuda to speak on two panels about climate risk, but he spent the majority of his stay navigating an itinerary offered by Bermuda's billion-dollar reinsurance houses: invitations to dinners, a rum tasting, a cocktail cruise, island excursions, and a casual LGBTQ+ lawn party at which Lara was the special guest, called "Pride and Prosecco."

Lara's island hosts held a big stake in what the regulator of the nation's largest insurance market might do next. Reinsurers — who sell catastrophe insurance to other carriers — were doubling rates and reaping record profits, causing duress for the struggling property insurers back home. And Lara faced enormous pressure from those California carriers to let them pass the charges on to consumers.

It was an industry agenda Lara had previously opposed, but the faltering California market had backed him into a corner.

Weeks after returning from Bermuda, in closed-door sessions arranged by Gov. Gavin Newsom, Lara would concede. He agreed to placate the insurance industry with a series of measures, including swifter and larger rate hikes, to curb the power of consumer advocates and limit what insurers have to pay in market bailouts. In return, carriers would commit to insuring homes in high-risk regions — a guarantee critics say contains caveats that allow insurers to skirt their obligations to extend coverage where it is needed most.