The insurance squeeze rippling through California’s foster care system has moved from a financial problem to a potential placement stability crisis for children in state custody, with foster family agencies closing across the state and leaving counties scrambling for certified homes. The pressure has intensified since the nonprofit insurer that once covered roughly 90% of the state’s foster family agencies stopped renewing policies, and advocates say the resulting premium spikes could force more agencies to shut down.
The California Department of Social Services said since 2024, more than two dozen nonprofits that recruit, train and support foster parents have closed in 13 counties. Those foster family agencies have historically provided a pathway for placements—particularly for children who need intensive support—into certified homes while children move toward adoption or reunification.
The closures have come roughly two years after Nonprofits Insurance Alliance of California backed out of covering foster family agencies, citing rising legal costs. According to the account of the crisis, the group covered about 90% of the more than 200 foster family agencies operating statewide, leaving agencies to seek coverage from outside providers, including companies outside the state and sometimes outside the country.
As insurers disappeared from the market, agencies said they faced steep increases in liability coverage costs. The reporting cited premium hikes of 200% to 400% in an “unregulated market,” and described many agencies reporting annual premium increases of more than $350,000.
State funding has offered only temporary relief. The Legislature last year approved a one-time $31.5 million allocation to help buoy agencies as they faced what advocates described as unsustainable premiums, but the money has run out. Assemblymember James Ramos and Sen. María Elena Durazo have requested another $30 million in relief funding, seeking to prevent the short-term patch from turning into a larger system rupture.
Advocates warn that without longer-term policy solutions, additional agency closures could destabilize placements for foster children. Pete Weldy, chief executive officer of the California Alliance of Child & Family Services, said that when an agency shuts, placements can be disrupted and children may have to move between counties, foster families and even schools. He also warned that disruptions can worsen behavioral health needs and can contribute to the worst-case scenario of a child becoming unhoused.
Weldy described foster family agencies as stepping in quickly when a child is removed in the middle of the night due to abuse or neglect, with homes he said are “at the ready.” After initial placement, he said the agencies continue to work with foster families and children to provide sustained support such as around-the-clock care, crisis assistance and consistent case management—services that can be hard to replicate if an agency closes.
Diana Boyer, managing director of research and policy at the County Welfare Directors Association of California, said that the impact of closures would reach beyond agencies to the children counties serve. “It would be an absolute crisis if the foster family agencies closed,” Boyer said. “Foster children are the state’s children. We all collectively need to be doing more to support them and ensure that they have homes and families to go to.”
The insurance crisis is connected, in part, to California’s efforts to provide redress to survivors of sexual abuse. Legislation passed in 2019 lifted the statute of limitations, allowing survivors to sue government agencies, and thousands of lawsuits have been filed since then, with the resulting payouts described as contributing to rising insurance costs for public agencies more broadly. Schools were among the first to report cost pressure tied to liability coverage for the suits, the reporting said.
Nonprofits Insurance Alliance of California stopped renewing coverage after a $25 million jury award to three children following jurors’ findings that a foster family agency in Santa Rosa failed to protect them from sexual abuse. The insurer group also had pursued efforts to reform California law related to insurance and liability, though the account described those attempts as mostly failed.
For individual foster parents, the agency closures can also mean losing familiar support structures. Sara and Tony Iagmin have fostered 45 children since 2013 and said they worked with Angels, a San Diego-based foster family agency that recently closed. They said case managers visited weekly during their fostering years, and they described having “good workers” available through a known channel, while also warning that closures may lead more children to “fall through the cracks” and add strain for foster parents, especially those new to the system.
Other foster families described similar ties to agencies that help manage certification and ongoing support. In Placer County, Sarah and Michael Prince said they worked with Koinonia Family Services, which they described as helping guide them through the long certification process; they said the couple went on to take in 13 foster children and adopted four.
Koinonia’s manager, Laura Richardson, said the organization works with roughly 360 homes, with 99 not taking placements, and that on any given day it serves around 200 youth in foster family homes. Richardson said Koinonia’s insurance increased by 242%—from $272,000 to $933,000 per year—after Nonprofits Insurance Alliance of California stopped renewing its policy, and that the change has forced the organization to rescind licenses in three cities, moving families to other offices still operating.
Richardson said Koinonia is trying to hold out while the state considers additional solutions. “I worry about the safety net for these most vulnerable youth going away,” she said. “It’s going to stress other parts of the system. So the state is going to have to pay for it somewhere. My hope is that we can fix what’s good about what we already have before we lose it.”