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AB 2724

Catastrophe modeling: distressed areas.

2025-2026 Regular Session Introduced by Rebecca Bauer-Kahan

AB 2724 defines distressed areas as undermarketed ZIP Codes overlapping high fire risk, with annual public updates and reviews by CDI.

Referred to Com. on INS.
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Bill Summary · AB 2724

AB 2724 (2025-2026) — Catastrophe Modeling: Distressed Areas

Purpose and intent

AB 2724, introduced by Assembly Member Bauer-Kahan, aims to refine how California identifies “distressed areas” for purposes of catastrophe modeling used in insurance commitments, particularly in the wildfire-prone regions and within the Fair Plan framework. The bill seeks to tighten the geographic scope to undermarketed ZIP Codes and to establish a formal, periodic process for updating distressed areas with public participation and transparent bulletins.

Key provisions and changes

  • New definition of distressed area (Article 12.5, Section 979):

    • A distressed area for catastrophe modeling purposes would include only undermarketed ZIP Codes.
    • An undermarketed ZIP Code is defined as a ZIP Code that:
    • partially overlaps a high or very high fire hazard severity zone, as shown in maps by CAL FIRE.
    • has at least 10% of its residential properties insured by the FAIR Plan or insured in the voluntary market by admitted insurers under a qualifying residential property policy.

  • Public reporting and updates:

    • The California Department of Insurance (CDI) must publish an initial bulletin listing undermarketed ZIP Codes.
    • The CDI must update the list at least annually and publish subsequent bulletins.
    • The department must review and revise regulations as necessary to implement these provisions.

  • Distressed areas review schedule:

    • On or before July 1, 2027, and annually thereafter, the CDI must review and update distressed areas consistent with Title 10, Section 2644.4.8, CFR.
    • Mandatory elements in the review process include:
    • Consultation with the California Department of Forestry and Fire Protection (CAL FIRE).
    • Consideration of ZIP Codes meeting the undermarketed threshold (10% insured by FAIR Plan or voluntary market).
    • Development of a process that allows for meaningful public participation, including at least one public meeting for suggestions and public access to proposed distressed areas.

  • Public availability and accountability:

    • By January 1, 2028, and annually thereafter, the CDI must publish a bulletin listing distressed ZIP Codes on its website and provide the information to the Assembly Committee on Insurance and the Senate Committee on Insurance.

Affected parties and potential impact

  • Insurance market and policyholders:

    • The definition of distressed areas directly influences catastrophe modeling inputs used in insurer commitments and potentially impacts rate-setting, underwriting, and availability of coverage for properties in affected ZIP Codes.
    • The FAIR Plan and participating insurers may see changes in how risk is allocated and in which ZIP Codes are targeted for certain insurance programs.

  • Geographic scope and communities:

    • Communities within undermarketed ZIP Codes—especially those overlapping high wildfire risk zones—could experience shifts in eligibility for certain insuring options and changes in regulatory oversight.

  • Regulatory and public participation processes:

    • The bill mandates transparent, annual updates and at least one public meeting per review cycle, increasing stakeholder engagement in determining distressed areas.

Timelines and procedural notes

  • Initial definitions and authority established upon enactment.
  • July 1, 2027: CDI to begin annual reviews and updates.
  • January 1, 2028: CDI to publish the first annual distress list bulletin.
  • Annual bulletins thereafter, with ongoing regulatory updates as needed.

Overall, AB 2724 seeks to align disaster-risk designation more tightly with undermarketed ZIP Codes that intersect wildfire risk areas, while instituting regular, transparent updates and opportunities for public input.

Compiled from official sources — confirm details with the bill’s official record.

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