In the News
NAMIC Questions California Nonrenewal Moratorium Order

• Timothy Darragh
• December 2020
• 

The California Department of Insurance has ordered insurers to halt issuing notices of nonrenewal to homeowners in fire-ravaged parts of the state, a move that one insurance trade group says could make coverage more expensive and difficult to find over time.

The one-year moratorium announced Nov. 5 by Insurance Commissioner Ricardo Lara will affect 2.1 million policyholders, or 18% of California's residential insurance market, the department said.

The order also affects about 364,000 policyholders who were covered by an order issued by Lara last year.

But Erin Collins, vice president of State Affairs for the National Association of Mutual Insurance Companies, said ordering a moratorium year after year is not sustainable for what still is “an extremely competitive” marketplace.

“Insurers, like all businesses, need to be able to evaluate and adjust their business commitments to preserve their solvency on behalf of their customers,” she said.

“Telling insurers that they must accept risks that exceed the appropriate risk for their organization and collective of policyholders is likely to adversely impact availability of coverage and affordability of insurance in the long run.”

The department was required to issue the moratorium under a law Lara authored in 2018 while serving as a state senator. The measure requires insurers to give homeowners temporary relief from nonrenewals if they are living in or next to a declared wildfire disaster.

Residents in 538 ZIP codes are covered by the latest moratorium, department spokesman Michael Soller said. Lara put insurers on alert in August with a notice that the moratorium order would be forthcoming. “I don't think there's a surprise here for the insurance industry,” Soller added.

The law prohibits issuing nonrenewal notices for a year, and because notices require a time period before a nonrenewal can take effect, the practical impact of the action is to give homeowners in affected areas a “year-plus” of relief, Soller said.

The order follows Gov. Gavin Newsom's emergency declarations this year on Aug. 18, Sept. 6, Sept. 10 and Sept. 28, giving protections for one year from those dates for residential insurance policies in ZIP codes within or adjacent to the fire perimeter, the department said.