California’s insurance market is no stranger to volatility, but the challenges it faces today have reached critical levels. Frequent natural disasters, especially wildfires, have sent shockwaves through the industry, driving up claims and losses while prompting carriers to exit the market altogether.
In 2023, natural disasters – including severe storms, wildfires, and floods – led to $12.5 billion in insured losses in California. This contributed to the broader US total of $99 billion in insured damages for the year. What’s more, a series of atmospheric river storms in early 2023 caused $1.5 billion in insured damages, flooding homes, roads, and infrastructure – not to mention the growing cost of the LA wildfires. So much chaos in such a concentrated area has led to a collective nightmare for Cali insurers.
“One of the issues, especially that we’re seeing now, is the inability for standard lines carriers to in California to raise rates to remain profitable,” Caleb Whitehouse (pictured), of Novatae Risk Group, said. “[The regulatory gridlock] had a massive effect on carriers pulling out of California. You’ve got it stuck with only a handful of standard lines carriers remaining.”
And the result? A market where risk isn’t spread across enough players to remain sustainable. With fewer admitted carriers left, brokers are stepping up to devise creative solutions in this high-pressure environment. Whitehouse explained that excess and surplus (E&S) markets, in particular, are employing a strategy of layered policies to mitigate risk.
“Instead of writing $10 million with one carrier, now we’re writing five with one, then a cap, and five with another,” he said. “Nobody wants to take the entire risk anymore. Everybody wants to piece it out. [Because] people are trying to cap their risks in California – as such, we're trying to be as creative as possible on what we can offer.”
And many retail insurance agents writing with standard market, Whitehouse said, lack experience with layering policies, which has placed an added burden on wholesalers to educate their clients. This isn’t just about sharing knowledge – it’s about enabling agents to deliver viable coverage options in an environment where risks are growing but capacity is shrinking.
“Some of them have never layered a policy before in their life,” he said. “Part of our role as a wholesaler is to help them understand our portion of the industry.”
Beyond fire risk, Whitehouse pointed to emerging opportunities in areas like residential elderly care – a niche that is seeing significant growth in California. Under previous arrangements, homes accommodating up to five residents were often covered under homeowner policies, leaving operators with inadequate protection.
“It was done improperly, and they didn’t quite understand that these are actually commercial exposures rather than a residential,” he said. “Now they’re placing proper coverage for their risks.”
Market adaptation requires more than just creative risk management; it demands a willingness to embrace data-driven strategies. For Novatae, this has meant a deeper dive into its own operations. “We’re doing a massive campaign right now of our internal data, processing that information, listening to what our clients’ needs rather than simply providing what we normally offer,” Whitehouse said. This approach has allowed the organization to remain agile in meeting evolving client demands. A recent acquisition of a London broker has further expanded Novatae’s flexibility, opening new pathways for international collaboration.
But Whitehouse was clear that client education remains a key pillar of their strategy. He emphasized the importance of shifting clients’ focus from price shopping to prioritizing meaningful coverage.
“The question comes down to, why are you buying insurance?” he said. “Are you buying it simply to satisfy a lender or contract requirement, or are you buying it to truly protect your investments?”
While challenges dominate the landscape, there are opportunities to be seized – if brokers have the foresight to capitalize on them. Whitehouse, for instance, is optimistic about the rising demand for manufacturing and construction insurance. “I grew up in a family of entrepreneurs,” he said. “I love manufacturing; it’s one of my favorite classes of business.”
Ultimately, the California insurance market serves as a crucible for innovation and resilience. Brokers like Whitehouse are navigating this complex terrain with strategies that not only mitigate risk but also open doors to new opportunities. By educating agents, deploying layered policies, and leveraging data, the industry is finding ways to adapt in the face of mounting challenges.
As Whitehouse put it: “Insurers are trying to cap their exposures in California. So we’re trying to be as creative as possible.”
