By Victoria Torres

On July 25, 2025, the Department of Insurance (DOI) announced its final evaluation for DOI’s first wildfire model. In July and August 2025, the Department’s Model Advisor, Kara Voss, analyzed three different wildfire models under the newly created Wildfire Catastrophe Model Checklist. The models include Verisk’s Wildfire Model, Moody’s Analytics, Inc.’s North America Wildfire Model, and Karen Clark & Company’s US Wildfire Reference Model. At the time of this writing, these wildfire models and their respective methodologies have not been released to the public. The models were assessed compared to the Wildfire Catastrophe Model Checklist to see if the proposals would meet the Department of Insurance’s standards for ratemaking. Now that these models have been assessed and accepted by the Department of Insurance, insurers may now use these wildfire models to set their rates in high-risk areas.

This action was part of the Department of Insurance’s Strategic Insurance Strategy (SIS) that was adopted in January 2024. SIS was created with the goal of increasing the amount of coverage offered to consumers in high-risk areas who may be affected by wildfires and bring more insurers into the market. SIS allows insurers to consider the costs or benefits when ratemaking with the goal of requiring increased coverage to high-risk areas that experience wildfires. This strategy does not impose any penalties for insurers that do not meet this requirement.

DOI’s Commissioner, Ricardo Lara, supports SIS and the model assessments. Lara shows an emphasis on insurance companies continuing their services in California. Additionally, Lara stated that the model reviews will be beneficial to consumers because they hold insurers accountable by requiring ratemaking to be based upon facts.

Concerns from Carmen Balber of Consumer Watchdog point to the lack of transparency of the models themselves. Additionally, the organization notes conflict of interest concerns for both the Moody and Verisk models.

“Top catastrophe modeler RMS is owned by insurance ratings firm Moody’s. The largest shareholder of Moody’s RMS is Berkshire Hathaway, through the Warren Buffet-owned insurance companies National Indemnity Co. and GEICO. Wall Street financial services companies The Vanguard Group and BlackRock Inc., which manage hundreds of billions in assets for insurance clients, are the top shareholders in the other modelling industry giant, Verisk Analytics. Vanguard and BlackRock are also the second and third largest shareholders of Moody’s. Both RMS and Verisk have lobbied to get Insurance Commissioner Lara to allow the use of secret catastrophe models to set rates.”

Consumer Watchdog is concerned these models will be more beneficial to insurance companies’ ratemaking rather than consumers.