By Sean Dilweg, Former Wisconsin Insurance Commissioner

The insurance industry’s most important wildfire debate is no longer about claims, losses, or rebuilding communities after a disaster. It is about what happens years before the first spark occurs; when insurers decide where they can write business, regulators decide how markets should function, and homeowners discover that coverage is becoming increasingly difficult to obtain.

The Litigation Is No Longer About the Fire

Traditionally, wildfire litigation focused on questions of causation, property damage, claims handling, or subrogation. Today’s lawsuits increasingly focus on events that occurred years before the fire ever started.

Plaintiffs are asking:

• Why was coverage non-renewed?
• Why were premiums increased dramatically?
• Why was the policyholder moved to the FAIR Plan?
• Were insurers acting independently or collectively?
• Were consumers adequately informed of coverage limitations?
• Did regulators properly oversee the marketplace?

These are fundamentally regulatory and operational questions rather than claims-handling disputes.

As a result, litigants are increasingly seeking experts with backgrounds in insurance regulation, underwriting governance, market conduct, and carrier operations.

Understanding the FAIR Plan Debate

Few insurance mechanisms have received more attention recently than California’s FAIR Plan.

The FAIR Plan was never designed to be a permanent substitute for a competitive private insurance market. It was established as a residual market mechanism intended to provide basic property coverage when traditional insurance becomes unavailable.

As wildfire exposure increased and insurers reassessed risk concentrations, more homeowners migrated into the FAIR Plan.

The resulting litigation often centers on whether:

• Consumers understood the coverage differences.
• Agents properly communicated coverage limitations.
• Carriers complied with notice requirements.
• Underwriting decisions were consistent with filed guidelines and regulatory requirements.
• Regulatory frameworks adequately protected consumers.

These issues require experts who understand both insurance operations and regulatory expectations.

The Collision of Three Forces

Much of the current tension can be traced to three converging realities.

1. Catastrophe Risk Is Increasing

Wildfires have become more severe, more frequent, and more costly.

Insurers must evaluate:

• Geographic concentration risk
• Reinsurance availability
• Capital adequacy
• Catastrophe modeling outputs
• Long-term solvency concerns

From a regulatory perspective, ignoring these risks would be irresponsible.

2. Consumers Need Affordable Coverage

Homeowners often view insurance as a necessity rather than a discretionary purchase.

When coverage becomes unavailable or unaffordable, the impact extends beyond individual consumers to:

• Mortgage lenders
• Real estate markets
• Local governments
• Community resilience

This creates significant political and regulatory pressure.

3. Regulators Must Balance Both Interests

State insurance regulators are charged with maintaining both consumer protection and insurer solvency.

The challenge becomes particularly difficult when:

• Loss experience deteriorates rapidly.
• Catastrophe models evolve.
• Reinsurance costs spike.
• Insurers seek rate increases.
• Consumers demand affordability.

No regulator can simply choose one objective while ignoring the other.

Juries Face Technical Questions

Many of the current lawsuits involve highly technical questions that juries may find difficult to evaluate without expert guidance.

For example:

Was a Non-Renewal Appropriate?

An expert may need to explain:

• Regulatory requirements
• Filed underwriting guidelines
• Risk-selection practices
• Industry norms

Did Insurers Coordinate Their Actions?

An expert may analyze:

• Market conduct standards
• Antitrust considerations
• Regulatory filings
• Competitive marketplace behavior

Were Consumers Adequately Informed?

An expert may evaluate:

• Notice requirements
• Agent responsibilities
• Disclosure obligations
• Industry practices

These issues often sit at the intersection of law, regulation, and insurance operations.

The Importance of Regulatory Perspective

One of the challenges in these cases is that many industry practices appear straightforward when viewed from only one perspective.

Policyholders understandably focus on the loss of coverage.

Insurers focus on capital requirements and risk exposure.

Regulators focus on market stability and consumer protection.

An effective expert witness must understand all three perspectives.

Having served as an Insurance Commissioner during the Great Recession, I learned that insurance markets can become stressed for many reasons. Whether the issue is mortgage-backed securities, financial guarantees, private equity ownership, or wildfire exposure, regulators are often forced to make difficult decisions where every available option carries consequences.

The current wildfire insurance litigation reflects that same reality.

Looking Ahead

The next generation of insurance litigation is likely to focus less on individual claims and more on the structure of insurance markets themselves.

Questions involving:

• Availability of coverage
• FAIR Plan operations
• Underwriting restrictions
• Catastrophe risk management
• Regulatory oversight
• Consumer disclosures

will increasingly require experts who understand not only insurance company operations but also the regulatory frameworks governing those operations.

It will be important for regulators to monitor the outcome of these disputes.  The rulings and settlements will help define how insurers, regulators, and consumers navigate an era of increasing catastrophe risk.  This makes wildfire litigation more than a regional issue. It is becoming a national test case for the future of property insurance in America.