Verisk has submitted its wildfire catastrophe model for review under California’s new regulatory framework, which allows insurers to use catastrophe models in rate setting.
The company filed its application with Insurance Commissioner Ricardo Lara, requesting the initiation of a Pre-Application Required Information Determination (PRID) procedure for the Verisk Wildfire Model for the United States.
The model leverages data on wildfire hazards, vulnerability, and recent trends affecting wildfire risk in the Western United States, according to Verisk's filing with the California Department of Insurance (CDI).
“This model is a key part of Commissioner Lara’s comprehensive Sustainable Insurance Strategy,” Verisk said in a report from AM Best. The company noted that the model would enable insurers to better assess risk and accurately price insurance for homeowners and businesses in wildfire-prone areas.
The California Department of Forestry and Fire Protection reported that more than 1 million acres were burned across over 8,000 wildfires last year. In response, the state has implemented regulations to help stabilize its insurance market and ensure adequate coverage in high-risk areas.
Rob Newbold (pictured above), president of Verisk Extreme Event Solutions, described the review as a significant step for California’s insurance market.
“This is a pivotal moment for California’s insurance market, one that promises improved resilience and stability for providers and potential insureds,” he said.
Newbold expressed optimism that the expansion of forward-looking models would contribute to a more stable insurance environment for both carriers and policyholders.
Verisk highlighted its history in catastrophe modeling, noting that it “pioneered the catastrophe modeling business in 1987” and has decades of experience in assisting carriers to manage risks related to natural disasters. The company stated that it serves over 400 clients across the insurance industry, public sector, and other entities.
The PRID process, introduced under Lara’s regulations, allows CDI to review the integrity of catastrophe models and ensure compliance with Proposition 103, which governs insurance rate approvals in California.
Lara recently finalized a regulation requiring insurers to expand coverage in high-risk wildfire areas and limit costs passed on to consumers. Verisk’s wildfire model is among the first to seek approval under this framework.
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