Bill Clerico, founder of Convective Capital, said that California’s long-standing insurance regulations, designed to prevent homeowners from being overcharged, have contributed to a shrinking market in high-risk areas.
“California passed a law in 1988 to keep insurance companies from overcharging homeowners. It worked so well that the insurance companies left and now 670,000 homeowners can’t get coverage at all,” Clerico said in a post on X, referring to Proposition 103 and its impact on the state’s insurance market.
The comments come as California continues to face a homeowners insurance availability crisis, particularly in wildfire-prone regions where carriers have reduced exposure or exited the market. As traditional insurers pull back, more residents have turned to the state’s insurer of last resort.
The California FAIR Plan Association reported 668,609 policies in force as of December 2025, up 146% from September 2022. The plan’s total exposure reached $724 billion at year-end, reflecting the growing number of homeowners unable to secure coverage in the private market.
Clerico also said regulatory changes are beginning to reshape how insurers price wildfire risk.
“Prop 103 did three things that made it impossible to price wildfire risk,” he said. “New reforms are now allowing cat models and reinsurance cost passthroughs for the first time—in exchange for insurers committing to write policies in fire-exposed areas. This is the right framework. But it’s too little, too late.”
The California Department of Insurance recently announced a settlement with State Farm that keeps a previously approved 17% interim rate increase for homeowners policies in place. Industry forecasts cited by Insurify project rates could rise an additional 16% by the end of 2026.
Insurify has also reported that home insurance costs have increased more than 16% since 2023, while surplus lines carriers have expanded in areas where admitted insurers have reduced coverage.
Clerico said newer market entrants are helping fill the gap left by traditional insurers.
“Startups like Stand Insurance have surged into the gap, participating in the E&S markets which aren’t subject to the same caps,” he said. “And despite the big disadvantages of the E&S market, they are growing fast and bringing much needed capacity.”
Clerico is the co-founder and chief executive officer of WePay and the founder of Convective Capital, a venture capital firm focused on wildfire risk and climate-related resilience. It invests in companies developing technologies and services aimed at reducing wildfire damage, improving risk modeling, and strengthening insurance and infrastructure systems in fire-prone regions.
