Homeowners insurance is tricky for both good and bad reasons. Florida's homeowner's insurance market being so dysfunctional is a blinking red warning sign that things like Hurricane Milton are only getting more common. That's a market sending out a reasonable signal- hurricane risk on a low-lying state right next to the Gulf of Mexico and central Atlantic is bad and going to get worse in the future.

But California's homeowners insurance market is screwed up for legal reasons, and it isn't even the legislature's fault or something they can easily fix. It's the fault of Proposition 103, where a whole bunch of massive changes were made to how homeowners insurance worked, in 1988, by a 51-49 vote of the electorate. And the way that prop's work is that the legislature can't amend or change these regulations. The only way to fix it is another proposition to roll back those rules, where the electorate realizes that they did something dumb and agrees to fix it.

Among many other changes, this proposition specifically enumerates what kinds of models an insurance company can use to justify their rates (1). In 1988 global climate change models weren't a thing, so they're not on the list. And while with legislative regulations it would be easy to add an extra model type in as a side-amendment into a much larger bill (that sort of stuff happens all the time!) the California initiative system means that the state legislature can't change any of it. So they are really struggling with the rise of wildfires in particular, the insurance companies run their real models of what the risks will be, and then when they run the approved models they have to try and figure out how to get the approved models to capture that risk and it's really hard to do. The approved models basically force the companies to use the previous seven years of costs only, but if you believe that the risk of wildfires is steadily growing that underlying bias will destroy your company. So the only alternative is to withdraw from the market. Which is why major insurers who can are withdrawing (or threatening to withdraw as part of negotiations to try and force the IC to approve even larger rate hikes!) and smaller, less well capitalized insurers are taking a greater share, but will probably need to be bailed out if there is another bad fire season.

I live- and own a home!- in a nearby state where the real estate market is buoyed largely by people who are leaving California because of their dysfunctional real estate market (Prop 13 is the famous one but these are all pretty bad). So it's actually against my financial interest for California to fix their problems, but I want them to anyway because it's so intensely frustrating for me and I don't even live there.

1: To the directly elected Insurance Commission- another change in Prop 103- who has to approve all rate changes, which is now an ~18 month process, because of a third thing created in this proposition. The Consumer Intervenor's Process means that basically anyone can challenge a rate hike and if they convince the Commission that the hikes were too high then they get their costs and time paid for by the company that lost the rate hike. So there are people in California who make their living as private citizens reviewing and challenging all insurance company rate hikes.