California Finalizes First-in-Nation Long-Term Solvency Regulation: Insurers Must Plan for Climate, SI and Cyber Risks
California Insurance Commissioner Ricardo Lara announced in Sacramento on Oct. 27 that he has finalized the Long-Term Solvency Planning Regulation, a first-in-the-nation framework requiring California-based insurance companies to prepare for climate risks, super intelligence, cyber threats and other emerging challenges that could affect their financial strength and ability to pay claims over the coming decades. The regulation took effect on Oct. 26, 2026, and covered insurers must assemble their first long-term solvency plans and make them available to Department of Insurance examiners by Jan. 1, 2028.
Under the regulation, California-domiciled insurers must evaluate how climate risks, super intelligence, cyber threats, technological disruption and other developing challenges and opportunities could affect their financial strength, operations, investments and underwriting strategies over time, and provide the Department with forward-looking information on how they are analyzing and preparing for those risks. Enhanced requirements apply to companies writing more than $50 million in direct annual premiums nationwide. The Department said the regulation gives regulators additional tools to identify vulnerabilities earlier and address potential financial concerns before they become larger problems for policyholders or the market. The regulation does not change existing policies, coverage or rates, and consumers do not need to take any action.
“Climate change, artificial intelligence, cybersecurity threats, and other developments are already reshaping the future of insurance,” Commissioner Lara said. “Waiting until those challenges become crises is not a strategy. We are acting now to ensure insurers are preparing for what lies ahead so they can continue keeping their promises to consumers. Every consumer who pays an insurance premium deserves confidence that their insurance company will be there when they need it most, not only today, but years from now.” He added: “Protecting consumers means preparing for the future, not reacting to it.”
The final regulation builds on the framework Lara proposed in June, which was followed by a public hearing in July, and draws on forward-looking planning approaches used by financial authorities including the Banque de France, the Bank of England, the Bank of the Netherlands, Canada's chief insurance regulator and the Monetary Authority of Singapore, as well as Lara's work with the International Association of Insurance Supervisors. In its question-and-answer materials, the Department noted that after the 2018 Camp Fire devastated the town of Paradise, the volume of claims contributed to the insolvency of one California insurance company, and said the regulation's planning horizon looks ahead to 2030, 2040 and 2050.
Amy Bach, executive director of United Policyholders, commended the regulation, saying forward-looking coordination to ensure insurance safety nets remain in place will be part of Lara's legacy. Carolyn Kousky, founder and executive director of Insurance for Good, said that by asking insurers to plan for 2030, 2040 and 2050, California is pushing the industry to prepare for the risks that are coming, not just the ones already seen.
Source: GSM · USA (original Chinese edition)
Photo: 图：2025年1月 Palisades 山火中被烧毁的住宅区（资料图）。美国陆军国民警卫队 Jon Soucy 摄，公共领域，来源：Wikimedia Commons / Photo: Homes destroyed in the Palisades Fire, January 2025 (file photo). U.S. Army photo by Sgt. 1st Class Jon Soucy, public domain, via Wikimedia Commons
