California's commercial property and wildfire market

California commercial property is a three-tier market. Admitted insurers still write much of the state, under rate-filing rules that slow repricing. Surplus lines insurers take a growing share of the harder risks. The California FAIR Plan is the last resort, and since 2025 it can write up to $20 million per building. Each tier covers something different, so the real question is what a building has once it lands in the second or third.

What the Los Angeles fires did to the market

The January 2025 Los Angeles wildfires were, per Swiss Re Institute's March 2026 estimate, about $40 billion of insured loss and the largest wildfire event on its records. The California Department of Insurance (CDI) data table from July 2026 counts 2,990 commercial property claims and about $1.81 billion paid on them, inside a total of roughly 41,700 claims and $25.2 billion paid as of July 6, 2026. Those figures show the commercial share is real but small. The fires mattered more to the market than to commercial claim totals, because insurers were already reducing wildfire exposure before they hit.

The three tiers

Surplus lines placement in California carries a 3 percent premium tax plus a 0.18 percent stamping fee (2026 rates per the Surplus Line Association of California and a Troutman Pepper Locke tax chart), and it generally requires a showing that admitted insurers declined the risk (excess and surplus lines insurance explained, surplus lines taxes, stamping fees and diligent search). Whether a given broker uses admitted or surplus lines, ask which tier you are in. It changes the nonrenewal rules, the claims handling regime and who stands behind the policy if the insurer fails.

The FAIR Plan for commercial property

The FAIR Plan's Commercial Fire Policy is a named perils form. Its website lists fire, lightning and internal explosion as the core perils, with optional coverages such as vandalism and malicious mischief at extra cost. It is meant for businesses "unable to purchase coverage with a traditional insurance company," and its eligible property list includes apartments and hotels with five or more units, retail, manufacturing, offices, buildings under construction, and farms and wineries.

Limits expanded sharply in 2025. On March 28, 2025, Commissioner Lara approved FAIR Plan commercial limits of $20 million per building and $100 million per location, and the plan's high-value commercial option became available in July 2025. CDI describes it as a short-term measure for larger housing developments, homeowners associations and businesses, and its August 3, 2026 release said it was still available. Insurance Journal reported the agreement requires the plan to offer it for three years.

Three practical limits:

• The Commercial Fire Policy is property coverage. It does not provide liability, and the FAIR Plan website points to Difference in Conditions policies from other insurers as the companion for the gaps (Difference in conditions (DIC) policies: what they cover and when to buy). Whether and how it responds to income loss should be read from the form itself, so ask your broker to show you the wording (business interruption insurance: how business income coverage works).
• It excludes unlisted causes. A smoke or windstorm loss that does not fit the form leaves the owner with a gap.
• Earthquake is not part of it. See earthquake insurance for businesses: coverage, deductibles, limits.

The plan has grown fast. The FAIR Plan site reports 696,562 policies (dwelling and commercial combined) and $768 billion of exposure as of June 2026, up 8 percent in policies since September 2025. CDI's August 3, 2026 release said quarterly growth slowed to 1.9 percent in the second quarter of 2026, the third quarter in a row of slower growth, with about 24,000 policies leaving the plan in April and May.

Assessments reach other policyholders

When the plan's losses exceed its funds, it can assess its member insurers. In February 2025, CDI approved a $1 billion assessment after the Los Angeles fires. CDI's recoupment guidance says the assessment is split between personal and commercial lines by loss, with the personal-to-commercial split at about 97 to 3 percent, and that admitted insurers may seek to recoup 50 percent of assessments up to $1 billion for each side from their own policyholders, and 100 percent of any portion above $1 billion. In practice, a commercial buyer in the admitted market can see a temporary surcharge on a policy to pay for losses at the FAIR Plan.

Wildfire discounts apply to commercial property

California's Safer from Wildfires regulation (10 CCR 2644.9) requires admitted insurers to credit specific mitigation steps. CDI's rating-plan FAQ, revised September 4, 2026, says the regulation applies to any line, personal or commercial, where the insurer's rating plan segments price by wildfire risk. It covers single and multi-location commercial policies, and a rating plan must give each mandatory mitigation factor its own discount of at least $1. An insurer may not tuck the credits into subjective schedule rating. The Department says surplus lines insurers are expected to offer similar discounts, but the regulation does not bind them.

For a commercial owner that means documenting work: roof covering, ember-resistant vents, defensible space, and any community-level steps such as Firewise USA participation. mitigation credits and resilient construction for commercial property covers which actions count and how to prove them.

New protection against wildfire nonrenewal

Since January 1, 2026, California has barred insurers from canceling or non-renewing certain commercial property policies, for one year, in ZIP codes within or adjacent to a declared wildfire emergency perimeter, based solely on the wildfire. Insurance Code section 675.55 (added by SB 547) mirrors the residential moratorium and covers admitted and non-admitted insurers, according to CDI Bulletin 2026-6 of August 14, 2026 on the Gann Fire. Two limits matter:

• It excludes inland marine, transit and commercial auto policies.
• It excludes a policy with an annual premium of $25,000 or more where the insured averaged at least 25 employees over the prior 12 months. Habitational property, such as homeowners and condominium associations, apartments, student housing and senior living, stays covered either way.

So a mid-sized business with a large premium may not be protected, while a small retailer or a condominium association is. Notice periods and other nonrenewal rules also vary by policy type; read policy cancellation and nonrenewal: notice periods and your rights.

Worked example (hypothetical)

Say the owner of a two-story mixed-use building in a foothill ZIP code gets a nonrenewal from an admitted insurer. The building is worth $6 million to rebuild, with $400,000 of tenant contents and a landlord's rental income of $900,000 a year.

1. The broker checks whether the nonrenewal falls inside a declared-emergency ZIP code and whether the policy meets the $25,000 premium and 25-employee exclusion. If it does not, the nonrenewal may be barred for a year.
2. If the moratorium does not apply, the broker asks for admitted alternatives, documenting mitigation to earn the required credits.
3. If there are none, the next choices are a surplus lines quote or the FAIR Plan. The FAIR Plan's named-peril fire form can insure the building up to $20 million, but liability and perils outside the form have to come from elsewhere.
4. The owner compares the surplus lines policy's deductible, wildfire exclusions and sublimits with the FAIR Plan form plus a separate difference in conditions and liability policy.

The facts and amounts are invented to show the sequence, not typical pricing.

Key takeaways

• California commercial property splits among admitted insurers, surplus lines and the FAIR Plan, and each tier changes your coverage and your protections.
• The FAIR Plan can write up to $20 million per building and $100 million per location, but its Commercial Fire Policy is a named-peril form, so liability and other perils must be bought elsewhere.
• Admitted commercial policyholders can be surcharged for FAIR Plan assessments; CDI's guidance lets insurers recoup 50 percent of assessments up to $1 billion.
• Wildfire mitigation discounts apply to commercial property under 10 CCR 2644.9, so keep proof of the work.
• Since January 1, 2026, many commercial policies in declared wildfire ZIP codes cannot be canceled or non-renewed for a year because of the fire; policies with premiums of $25,000 or more for insureds with 25 or more employees are excluded, except habitational property.