California regulators are taking meaningful steps to address the state’s deepening property insurance challenges. After years of shrinking availability and rising risk, the California Department of Insurance (CDI) introduced its Sustainable Insurance Strategy (SIS) to help stabilize the market and encourage long-term participation by insurers.
At the heart of this effort is a major change in how wildfire risk can be reflected in insurance pricing. Historically, carriers were limited to backward-looking loss data when filing rates—a constraint that made it difficult to price coverage accurately in a state where wildfire behavior has changed dramatically. Under the new framework, insurers can now incorporate approved probabilistic wildfire models into rate filings, unlocking a more realistic view of future risk.
Why the PRID process matters
To enable this shift, the CDI created the Pre-Application Required Information Determination (PRID) process. PRID establishes a formal review pathway for advanced wildfire risk models, allowing insurers to use forward-looking analytics—rather than relying solely on historical losses—when justifying rates.
This change required navigating long-standing regulatory constraints, including those stemming from Proposition 103, which tightly governs how insurers can set rates in California. By introducing PRID, the CDI created room for modern catastrophe modeling without abandoning consumer protections.
For insurers that have pulled back from wildfire-exposed regions, this development represents a potential turning point. With better tools to measure risk, carriers may be able to reenter markets that had become economically unviable—helping restore coverage availability while maintaining actuarial discipline.
What insurers should consider when adopting probabilistic wildfire models
As PRID-approved models become more widely available, insurers don’t need to overhaul their entire modeling ecosystem overnight. Models currently used for purposes such as:
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exposure management
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reserving
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reinsurance placement
can continue to be used without PRID approval, as long as they aren’t directly supporting rate filings.
It’s also important to note that PRID approvals are expected to expand. Several widely used industry models are anticipated to enter the review process, meaning a lack of approval today doesn’t imply long-term exclusion.
What the CDI looks for in PRID-approved models
While each submission is evaluated individually, models approved through PRID are generally expected to demonstrate:
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Strong grounding in established scientific research
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Outputs that align with observed wildfire patterns
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Consistent, reproducible results
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Minimal bias in assumptions or outputs
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Transparency in how results translate into rate impacts
These criteria help ensure regulatory confidence—but they are not the only factors insurers should weigh. Operational usefulness, geographic granularity, and adaptability to evolving wildfire conditions are equally critical for real-world application.
A closer look at next-generation wildfire modeling
Some advanced wildfire risk solutions already align closely with PRID expectations and are being positioned for formal review. Among them is the Cotality Wildfire Risk Model, which is widely used across insurance, reinsurance, and infrastructure sectors to evaluate wildfire concentration risk and loss volatility throughout California.
An updated version of the model, scheduled for release in 2025 and submission for PRID review later that year, is designed to meet emerging regulatory standards while addressing the realities of modern wildfire behavior.
Key advancements include:
Location-specific risk insight
Rather than relying on averaged loss assumptions, the model delivers property-level risk differentiation—capturing the steep gradients that define wildfire exposure today. This includes factors such as conflagration risk, which has become increasingly relevant as fires grow larger and more destructive.
Comprehensive historical context
The model integrates wildfire data dating back more than a century, with continuous updates to reflect recent events—including fires occurring in 2025. This historical depth supports both validation and forward calibration.
Ongoing refinement for long-term resilience
Future iterations emphasize incremental, practical innovation, including:
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Detailed analysis of wind patterns, humidity, and atmospheric drivers
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Updated hazard and vulnerability assumptions
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Expanded property-specific characteristics for granular underwriting
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Enhanced modeling of extreme wildfire scenarios
These enhancements are intended to help insurers better understand not just where fires may occur—but how severe losses could be when they do.
Building a more insurable future for California
The introduction of PRID and the broader Sustainable Insurance Strategy signals a recognition that traditional tools are no longer sufficient for today’s wildfire environment. By allowing scientifically sound, forward-looking models into the rate-setting process, California is creating a pathway toward a more resilient and sustainable property insurance market.
As wildfire risk continues to evolve, insurers that pair regulatory-aligned models with ongoing innovation will be best positioned to balance affordability, availability, and solvency in one of the most challenging property markets in the country.
To learn more about advanced wildfire risk modeling solutions and upcoming regulatory alignment efforts, connect with Cotality.
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