The California FAIR Plan (the FAIR Plan) was created to provide insurance for high-risk properties that are difficult to insure through private carriers It is a private association made up of property and casualty insurers but it operates under legal requirements set by the state Insurers doing business in California must contribute to the FAIR Plan based upon their market share as insurers are withdrawing from California due to the increased risk wildfire claims the FAIR Plan’s exposure has grown significantly in scope resulting in serious financial challenges and new legislative efforts - such as Assembly Bill 226 known as the FAIR Plan Stability Act - to remain solvent Below is an overview of the key aspects of the FAIR Plan’s 2025 reinsurance structure and the tools to address those financial challenges A retention threshold refers to a specific dollar amount that the FAIR Plan is required to pay for a claim before reinsurance attaches the FAIR Plan is required to pay $900 million per wildfire event for reinsurance to attach As of April 2025, the FAIR Plan has paid out approximately $1.2 billion in claims related to the Palisades and Eaton Fires, which triggered reinsurance coverage.[1] The FAIR Plan estimates its total loss from the Palisades and Eaton fires at approximately $4.1 billion an assessment was ordered by the FAIR Plan requiring insurers to cover the fees based on their market share (assessment explained in Section 5 below).  The reinsurance program provides an additional $2.63 billion in coverage above the $900 million retention Once the initial $900 million threshold is met the next $350 million in claims is fully covered by reinsurance for claims After this first $1.25 billion ($900 million Fair Plan + $350 million reinsurance) claims payments are shared between reinsurers the FAIR Plan itself and/or private insurers This cost-sharing works on different percentages and layers of responsibility akin to how co-pays and excess layers work in the usual insurance context The total coverage caps out at $5.78 billion across catastrophic events annually which is the upper limit of coverage when co-insurance is included This cap is based on a modeled probability of a 102-year event To help stabilize the market and reduce dependence on the FAIR Plan new regulations in 2024 required large insurance companies to start offering comprehensive coverage in wildfire-prone areas as a condition of writing business in the state more generally These regulations aim to require insurers to write policies in fire-prone equal to at least 85% of their market share throughout California it will take time for these measures to have a significant impact due to phased implementation Insurers are required to start increasing their coverage by 5% every two years until they hit the 85% mark was passed the chambers in the Assembly with a unanimous voting on April 1 AB 226 is headed to the Senate to become law AB 226 gives the FAIR Plan flexibility to manage catastrophic wildfire losses without becoming insolvent It also clarifies that any such financial instruments (bonds loans) are not debts of the State of California ensuring the burden does not fall on taxpayers meaning it allows funds to be made immediately available to the IBank for these purposes The Insurance Commissioner Lara sponsored the Bill and it gained bipartisan support as well as the FAIR Plan’s the FAIR Plan also has the authority to issue market assessments to property insurers doing business in California An “assessment” is the Fair Plan’s right to—subject to the California Insurance Commissioner’s approval— require insurers licensed to sell property insurance in California to contribute funds to cover FAIR Plan losses based on their market share from two years prior The last time an assessment was issued was in 1994 The FAIR Plan has requested an assessment in response to the Los Angeles wildfires requiring the insurers doing business in California to pay $1 billion based on their market share Commissioner Lara approved the $1 billion assessment in Order No 2025-1: Approving the California FAIR Plan Association’s Request to Issue The FAIR Plan does not control how insurers manage the costs associated with the assessment is expected to lead to increased premiums or reduced coverage availability in the private market because insurers may adjust to offset their increased liabilities from FAIR Plan contributions  Bulletin 2025-4 lays out the full requirements for the recoupment from policyholders the FAIR Plan has received approximately 5,000 claims related to the Pacific Palisades and Eaton fires in Los Angeles.  With a reinsurance structure requiring a $900 million retention before coverage attaches and co-insurance obligations for the next $4.85 billion the FAIR Plan faces severe financial strain.  At least $1.2 billion has been incurred on claims received to date and the FAIR Plan will likely be liable in the co-insurance structure AB 226 is expected to pass to remedy the situation and prevent insolvency the coverage the FAIR Plan provides caps at $3 million per house which is inadequate given the high values of the houses in Malibu and Pacific Palisades The Sustainable Insurance Strategy published in 2024 aims to expand its commercial plan with coverage up to $20 million per building with a total aggregate of $100 million per location and is expected to be implemented by mid-2025 The assessment and AB 226 may help reach the objectives of the Sustainable Insurance Strategy Insurers can pass a portion of the FAIR Plan assessments to policyholders through temporary supplemental fees Insurers may recover up to 50% if the FAIR Plan assessment for amounts up to $1 billion provided the payment was not covered by reinsurance or other reimbursements For assessments exceeding $1 billion in a calendar year insurers may recoup 100% of the amount above $1 billion again contingent on no reinsurance or reimbursement Insurers must file a “rule change” application under Proposition 103 and obtain prior approval from the Insurance Commissioner The filing must occur within six months of the assessment notice the Commissioner explained the procedure through which the FAIR Plan’s member insurers may request prior approval under Proposition 103 to seek recoupment from their policyholders for FAIR Plan assessments An updated guidance was given to the insurers in Bulletin 2025-4 clarifying that the 100% recoupment percentage only applies to that portion of the assessment above $1 billion This will likely result in increase premiums for private insurance policyholders any surcharge would require the approval of the Insurance Commissioner and homeowners cannot be surcharged for commercial losses Since the assessment was ordered for $1 billion the policyholders are on the hook for 50% of the costs associated with the assessment with prior approval of the Insurance Commissioner under Proposition 103 and with the condition that the assessment is not covered by reinsurance or other recovery mechanism The Consumer Watchdog challenged the insurer’s ability to recoup FAIR Plan assessments via temporary supplemental fees levied on policyholder The Proposition 103 intervenor process will allow a time period to litigate the issue on the recoupment method via a supplemental fee the Commissioner issued a press release regarding a request for an “emergency interim rate increase” under Proposition 103 and scheduled an in-person meeting on February 26 as well as consumer impact and transparency in the decision making process This insurer covering 20% of the California market made the request stating that the Los Angeles fires had worsened its financial situation as it awaited the Insurance Department’s decision on rate requests it submitted last summer The insurer expects to pay more than $7 billion worth of claims from those fires Commissioner Lara’s department reached to an agreement at the February 2025 meeting for an increase in average %17 for homeowners—down from %22 the insurer originally requested; %15 for renters and condos and %38 for rental dwelling if approved by administrative law judge Karl-Fredric Seligman The FAIR Plan’s 2025 reinsurance structure is designed to help manage the financial risks associated with escalated wildfire risks in California the FAIR Plan’s reserves are likely inadequate to cover the remaining claims  after the reinsurance is exhausted and in case of any disaster in the summer of 2025 The tools available or proposed to prevent insolvency will likely avoid insolvency but is expected to result in further increases to policy premiums [1] “Approximately 45% of the wildfire claims are reported as total losses, 45% reported as partial losses, and 10% reported as Fair Rental Value only, which covers lost rental income due to a covered peril like fire”. https://www.cfpnet.com/update-from-the-california-fair-plan-6/ access date: April 17 The Colorado FAIR Plan has assessed insurers doing business in the state for $46 million Rocky Mountain Insurance Association.Katie Warnke of GreenEarth Photo For insurers taking part in the plan that want to recoup the assessment that works out to a surcharge of $17 to $22 per policyholder executive director of the Rocky Mountain Insurance Association which represents P&C insurers in the state Insurers seeking to recoup the assessment can decline to do so if their collection costs outweigh the benefits The small size of the surcharge would only be practical to collect in a one- or two-year timeframe some insurance carriers' solvency would be at risk "Smaller companies may not be in a financial position to not recoup the entire assessment immediately," Walker said in the hearing "The draft bulletin states that the surcharge should be applied fairly and equitably that doesn't make it clear that the surcharge amount could be a flat surcharge across all policy holders rather than an individualized premium surcharge." R2R/R2P Colorado liaison at United Policyholders A consumer advocate who spoke in the hearing said the surcharge should be limited "Any amount collected from a policyholder in any given year should be no greater than the amount equal to 5% of the policy premium for that policyholder," said Lisa Hughes Colorado FAIR Plan.LinkedIn Kelly Campbell executive director of the Colorado FAIR Plan emphasized that keeping the homeowners insurance market solvent should be the top priority with the regulation "We do just want to ensure that the regulation moving forward provides key components for member insurers in regards to their assessments and specifically provides them certainty and clarity in regards to the recoupment of that assessment," she said The Division of Insurance will accept further comments on the proposed regulation through 5 pm on Monday Colorado wildfire risk mitigation bill leaves specifics vague Learn from the industry’s top minds as they tackle the critical issues facing our community MORE FROM DIGITAL INSURANCE Agency strategies: Tapping into technology and AI Discover how artificial intelligence is reshaping commercial insurance Anupam Gupta Applied Systems Insurtech Clearwater Analytics acquires Beacon; Earnix buys Gen AI provider: Insurtech news Clearwater Analytics acquires Beacon; Earnix buys Gen AI provider Berkshire Hathaway Buffett hands successor a giant cash pile and many questions Buffett the 94-year-old architect and face of Berkshire Hathaway Inc. announced that the gathering would be his last as head of the company though he didn't specify the time period for the reductions Healthcare How AI is simplifying healthcare claims A good tech tool paired with the right safeguards could save patients and healthcare professionals a lot of time Artificial intelligence How insurtechs are using AI, from life insurance to wildfires These insurtechs have used AI to improve their businesses Is your tech agenda set for safety or standout growth? Over the last three years financial services sectors have been involved in a necessary but dramatic operational shift with their customers moving from physical to digital channels A consumer advocacy group has sued the California Department of Insurance and Commissioner Ricardo Lara to block hundreds of millions of dollars in surcharges that could soon appear on California homeowners’ insurance bills Consumer Watchdog said in a press release that those surcharges come from a decision reached by the commissioner last summer to allow the insurance companies that comprise and operate the California FAIR Plan to pass through costs to policyholders when the FAIR Plan is forced to assess those companies for funds after a catastrophe Consumer Watchdog said that because of that decision homeowners across the Golden State are on the hook to pay up to $500 million of the $1 billion FAIR Plan assessment approved on Feb 11 after the Palisades and Eaton Canyon wildfires ravaged parts of Southern California “The commissioner’s decision to allow pass-throughs is unjustified on multiple levels,” said Consumer Watchdog staff attorney Ryan Mellino “Homeowners and renters across the state will be charged more and the FAIR Plan won’t be depopulated The real beneficiaries of this decision are the insurance companies that make up the FAIR Plan We look forward to defending the rights and pocketbooks of Californians and stopping this socialization of FAIR Plan losses at the public’s expense while the FAIR Plan’s profits will wholly remain with the insurance companies.” In a statement responding to the announced litigation a spokesperson from the American Property Casualty Insurance Association (APCIA) called the lawsuit “a reckless and self-serving stunt that threatens to make California’s insurance crisis even worse and harm the consumers Consumer Watchdog purports to represent.” “Blocking recovery of the costs insurers have paid to safeguard the FAIR Plan would jeopardize the last-resort coverage option for homeowners—and push our fragile insurance market closer to total collapse,” said Denni Ritter APCIA department vice president of state government relations “It is critical that recovery costs be spread equitably across a broader pool of insured customers to help restore California’s insurance market and protect access to coverage for all consumers.” press secretary at the California Department of Insurance said in an emailed statement the litigation negatively impacts homeowners and nonprofits that require access to genuine insurance options while failing to address the ongoing insurance crisis it undermines our efforts to enhance competitiveness across the market which would allow people to transition from the costly and limited FAIR Plan back to the standard insurance market,” he said Consumer Watchdog’s petition alleges the commissioner’s decision to allow insurance companies to shift costs to homeowners was reached without any public input or participation in violation of the Administrative Procedure Act The petition also alleges that the pass-throughs directly violate the FAIR Plan statutes “which contain no authorization for pass-throughs and require insurance companies to proportionally share in both the profits and losses of the FAIR Plan and that the commissioner lacks any discretion to permit insurance companies to shift assessment costs onto homeowners,” Consumer Watchdog said “We recognize that the FAIR Plan has dramatically grown in recent years and agree with the commissioner that something must be done to address the situation,” Mellino said “But the answer is not a unilateral bailout of hundreds of millions – and in the future potentially billions – of dollars for insurance companies at the expense of their policyholders California homeowners have suffered enough and unlawful pass-throughs are just another insult on top of the significant injuries they’ve already faced.” Ritter said that insurers are “committed to helping Californians recover and rebuild from the devastating Southern California wildfires Insurers have already paid tens of billions in claims and contributed more than $500 million to support the FAIR Plan’s solvency—even though they do not collect premiums from FAIR Plan policyholders.” Consumer Watchdog’s petition can be found here. Thank you! Please tell us what we can do to improve this article. Thank you! % of people found this article valuable. Please tell us what you liked about it. This group of trial attorneys helped create the insurance capacity shortage in the state and now they want to perpetuate it. Their main motivation is the $600+ per hour fees they charge for their “services”. With Proposition 103 passed in November 1988, they snuck in the intervenor process so they could profit from companies and consumers. There appears to be no regulation for this group. Your email address will not be published. Required fields are marked * Δdocument.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Print A Los Angeles consumer group has sued Insurance Commissioner Ricardo Lara to block potential surcharges on home insurance policies statewide as a result of the heavy losses suffered by the California Fair Plan after the Pacific Palisades and Altadena fires In a lawsuit filed in Los Angeles Superior Court on Monday Consumer Watchdog alleges that Lara violated state law when he reached a deal last year with California’s property insurer of last resort that would allow its member insurance companies to charge their policyholders for some of the billions of dollars of Fair Plan losses The Fair Plan Assn. is run by licensed property and casualty companies to offer insurance to home and business owners who cannot obtain insurance through the commercial market. The insurers backstop its losses and enjoy its profits based on their market share. “We look forward to defending the rights and pocketbooks of Californians and stopping this socialization of Fair Plan losses at the public’s expense, while the Fair Plan’s profits will wholly remain with the insurance companies,” Consumer Watchdog staff attorney Ryan Mellino said in a statement. Business may be unable to pay billions in claims arising from the Los Angeles fires and may require a bailout that could ultimately be paid by homeowners statewide said the department could not comment on the lawsuit’s allegations but added: “This hurts homeowners small business and nonprofits who need access to insurance options while doing nothing to address the insurance crisis It also serves to undermine our efforts to restore competition to all areas of our state so people can get off the Fair Plan and back to the regular market.” The Fair Plan declined to comment on the lawsuit The Fair Plan has grown rapidly as insurers have pulled out of the state’s fire-prone neighborhoods with its rolls jumping from about 200,000 residential policyholders in 2020 to nearly 560,000 as of March The Los Angeles-based association of insurers has said it expects losses of $4 billion due to the Jan A state bill would allow the plan to issue bonds to help cover losses but last month the plan also received approval from Lara to assess its member companies $1 billion to help pay claims — with consumers possibly on the hook for nearly half of that Proposed reforms of the California FAIR Plan are slammed by a consumer group as a ‘bailout’ for the insurance industry Insurers would be required to cover up to $2 billion in FAIR Plan claims — $1 billion for residential and $1 billion for commercial claims They could then temporarily surcharge their own policyholders for half of what they are assessed with Lara’s approval Homeowners would not be surcharged for commercial losses But the agreement also allows insurers to temporarily surcharge policyholders for 100% of claims in excess of those amounts with the approval of the insurance commissioner Consumer Watchdog called the deal an industry “bailout.” vice president for state government relations for the American Property Casualty Insurance Association trade group called the lawsuit a “reckless and self-serving stunt that threatens to .. harm the consumers Consumer Watchdog purports to represent” by pushing the state’s “fragile insurance market closer to total collapse.” The Jan. 7 wildfires damaged or destroyed more than 16,000 homes The Fair Plan said the $4 billion in losses caused by the Palisades and Eaton fires as well as the Hurst fire in the Sylmar area wiped out its reserves and $5.78 billion in reinsurance — which includes a $900-million deductible and co-payments that raise the plan’s cash payouts to $3.5 billion received approval to assess member carriers $1 billion to help pay its L.A fire losses -- with consumers possibly on the hook for nearly half Consumer Watchdog alleged in its lawsuit that Lara’s actions violated state law because nothing in the 1968 statute that created the Fair Plan contemplated such an assessment on policyholders It also alleged Lara violated state law by approving the assessment policy via “admistrative fiat” rather through the proper rule-making procedure Lara implemented the new Fair Plan policy last year as part of his Sustainable Insurance Strategy, which seeks to reduce the plan’s rolls by giving insurers several policy concessions in the hopes they will write more policies in fire-prone neighborhoods. Ten victims of the Palisades and Eaton fires sued the Fair Plan accusing California’s insurer of last resort of mishandling smoke damage claims Those concessions include allowing them to charge policyholders for the cost of reinsurance they buy to protect themselves from catastrophes Consumer Watchdog contends in its lawsuit that allowing policyholder surcharges will not give insurers more incentive to write more policies in risky neighborhoods The consumer group’s legal action is only the latest lawsuit involving the Fair Plan. Last week, 10 plan policyholders in the Palisades and Eaton fire zones filed a tort claim against the plan, accusing it of failing to investigate or properly compensate for smoke damages. Prior lawsuits have been filed in Los Angeles and statewide with similar smoke-damage claims against the plan. Laurence Darmiento covers finance, insurance, aerospace and dealmakers in Southern California for the Los Angeles Times. He joined the paper in 2015 as an assistant business editor and has overseen finance, real estate and Washington business coverage. Previously he had been the managing editor of the Los Angeles Business Journal and was a reporter for the Los Angeles Daily News and other outlets. A New York native, he is an alumnus of Cornell University. Hollywood Inc. Subscribe for unlimited accessSite Map Join us for a 12-hour food drive Friday, 6am to 6pm, in Redding or Chico. Help stuff a RABA or B-Line bus at Les Schwab with food donations! LIVE UPDATESCalifornia Fair Plan faces mounting lawsuits over denied wildfire claimsby Christina Mendez CALIFORNIA — Ten victims of the Los Angeles fires have filed a lawsuit against the California Fair Plan accusing the insurer of "bad faith" after being underpaid or denied coverage for smoke damage As wildfires in California grow more destructive insurance agencies are increasingly reluctant to cover homeowners the plan has been criticized for not living up to its name with many wildfire victims having their claims denied if there was no or limited physical loss "California created the Fair Plan specifically so that wildfire survivors would have somebody backing them up in that moment where they are trying to rebuild their lives," said Wade-Scott "But what we’re seeing is that for people who have smoke damage what we allege is that Fair Plan is systematically slowly playing those claims and then eventually underpaying or denying them outright." Wade-Scott added that the lawsuit argues the Fair Plan is aware it is improper to deny claims for smoke damage as Insurance Commissioner Ricardo Lara has already put them on notice "The firms on this case have been fighting the Fair Plan for years," Wade-Scott said "What makes this different is just the widespread scale of what we are seeing We have heard from hundreds of people intending to assert their claims against the Fair Plan We’re gonna be filing these lawsuits in the coming weeks and months and we eventually expect that thousands of people will be affected by this and will join this suit." Another law firm representing the plaintiffs is also handling a similar case for a Butte County couple against the Fair Plan The California Assembly has passed the FAIR Plan Stabilization Act (Assembly Bill 226) in a unanimous 72-0 vote where it has been read and referred to the Committee on Rules for assignment sponsored by Assemblymember Lisa Calderon (D-District 56) would authorize the California FAIR Plan to access additional financial capacity through the issuance of bonds or the establishment of a line of credit The legislation follows a recent $1 billion assessment issued by the FAIR Plan who also chairs the Assembly’s Insurance Committee said the bill is intended to stabilize the FAIR Plan by allowing it to spread costs over time through bond financing She said this would help prevent sudden insurer assessments that could otherwise lead to premium increases or financial strain for smaller insurers Assembly Bill 226 has also been identified as a priority for Assembly Speaker Robert Rivas who said the legislation would help the state recover more quickly from natural disasters and provide critical support for consumers across California the California FAIR Plan was created to provide insurance coverage to residents who cannot obtain it through the admitted or surplus lines markets The California Department of Insurance (CDI) said the program remains an essential resource for homeowners particularly in areas facing higher wildfire risk FAIR Plans exist in several states across the US each designed to serve as insurers of last resort for high-risk properties While the fundamental purpose is consistent—to provide access to insurance for those unable to obtain it through the private market – the structure and governance can vary Notably, California's FAIR Plan has faced criticism for its lack of transparency compared to counterparts in other states. An audit by the CDI highlighted that the California FAIR Plan is more secretive than similar plans elsewhere with directives issued to increase transparency and accountability The plan's financial capacity has been questioned especially following significant wildfire events the FAIR Plan estimated coverage for 22% of the affected structures with potential exposure upwards of $4 billion it had only $377 million available to pay out claims in addition to $5.75 billion in reinsurance This shortfall raised concerns about potential surcharges on all California homeowners to cover deficits Insurance Commissioner Ricardo Lara (pictured above) said he is sponsoring the bill as part of broader efforts to strengthen the FAIR Plan’s financial position Lara noted that the authority to pursue a line of credit would help buffer the Plan from the financial effects of future disasters and lessen the cost impact on policyholders Please feel free to share your comments below The suit targets the plan’s denials of smoke damage claims. California’s FAIR Plan is being sued by 10 policyholders who allege that its denials of coverage for smoke damage are illegal. The policyholders’ homes survived the LA wildfires but suffered smoke damage. The lawsuit says cleanup costs were denied by the FAIR Plan, even though smoke had turned their homes into “toxic traps, with each room and surface caked with invisible, hazardous chemical residue.” Your access to unlimited PropertyCasualty360 content isn’t changing.Once you are an ALM digital member, you’ll receive: SHARE ON FACEBOOK SHARE ON TWITTER Corey Dahl Corey Dahl is assistant editor with PropertyCasualty360.com. Reach her at [email protected] More from this author ⟶ Prices may rise but pickup truck loyalists are forever.. The rental insurance market is projected to exceed $100 billion this year About 4 in 5 drivers believe auto insurance pricing models are unfair Preparing for the Storm: The Insurers Guide to Roof Risk Traditional roof risk assessment falls short Ballooning combined ratios demand better methods This guide reveals how AI and new data sources provide significant lift over traditional models for hail and wind risk Browse More Resources › Enhancing Subrogation and Recovery: A Smarter Approach for Insurers Recovering funds from at-fault parties in auto claims is crucial for insurers yet subrogation challenges like incomplete data and manual processes slow the process This guide reveals how claims professionals can streamline subrogation and maximize recoveries with a more efficient approach Get the insights you need to speed up claims resolution and improve financial outcomes Driving Efficiency and Growth With Intelligent Information Management and increased competition are pushing insurers to modernize information management to boost productivity and efficiency Discover how Intelligent Information Management (IIM) transforms insurance operations--addressing key challenges and delivering measurable ROI by streamlining processes / For questions about PropertyCasualty360, please call 800-543-0874 (9:00am-5:30pm ET, Monday through Friday, except holidays), or send an email to [email protected] The Colorado FAIR Plan officially launched on Thursday which will provide some hope and relief for Colorado homeowners who’ve been dropped by their carrier or are unable to obtain insurance due to the state’s large wildfire and hail risk “This is a historic day for Colorado and insurance because the FAIR Plan was created for people who truly can't find insurance anywhere else to have a safety net for them,” said Carole Walker It’s more limited and more expensive coverage.” The FAIR Plan, which stands for Fair Access to Insurance Requirements, was approved by the state legislature in 2023. If a Colorado homeowner in a disaster-prone area isn’t facing steep premium increases they’re likely being dropped altogether by their carrier “I think this an important step forward for Colorado and for those struggling to find insurance in those high-risk areas,” said Walker To qualify, homeowners must be denied coverage three times by insurance carriers before they can speak with any licensed broker and begin the application process for FAIR Plan coverage But Walker and those with the Colorado FAIR Plan stress this isn’t an option meant to be more “affordable” for those upset with steep increases in costs but for those who truly have no other choice according to premium rate examples provided by the Colorado FAIR Plan with a market value of $850,000 would be charged $4,361.69 for fire coverage and an additional $1,151.94 for extended coverage (like hail and wind) which isn’t as susceptible to wildfires since it covers downtown 1 bath house worth $363,000 could get a FAIR Plan fire premium for $182 but an extended coverage premium for hail and wind damage would cost $1,197 Colorado isn’t the first state to offer a FAIR plan but it is the first plan to launch in 40 years previously described the process as essentially building a new insurance company from the ground up “Building the FAIR Plan was like building an airplane while you were flying through a thunderstorm without landing gear,” said Campbell “I think the great news is with this launch is that we have found that So we have great partners that are around us to help make this happen and to bring this forward and so we really do feel like we are creating that safety net for Colorado homeowners and businesses.” Though only the residential option is offered for now Campbell said the commercial FAIR Plan is expected to launch later in the spring Policy limits are $750,000 for residential and $5 million for commercial properties Campbell said they should be able to go through any licensed insurer in the state “So if you have been declined by multiple carriers then we encourage you to reach out to your agent because any licensed producer can write in the FAIR Plan if they choose.” The genesis of FAIR Plans stemmed from inner city riots in the 60s and 70s which is why Colorado’s version also offers vandalism coverage in addition to fire premiums and extended coverage Colorado hopes to avoid the insurance crisis bubbling in other states like California and Florida the insurer of last resort is the largest in the state as the private market has been driven out “We know that a lot of insurers are seeing a lot of different pressure points all across the country and we just want to make sure that there's that pressure release valve so that insurance carriers can really understand this new marketplace this new level of catastrophes that we're seeing all across the country and really adjust,” said Campbell “And we think the FAIR Plan is going to provide that opportunity.” it's worth noting that service members who retire and then teach at the Academy are considered civilian instructors Watch KOAA News5 on your time, anytime with our free streaming app available for your Roku, FireTV, AppleTV and Android TV. Just search KOAA News5 Report a typo But three months after the fire, Jordan says the family isn’t close to moving back. And she blames one entity for that: the California Fair Plan, the state’s insurer of last resort. Jordan says a door at their East Loma Alta Drive home swung open during the firestorm and the interior was coated with debris. Yet, she says, the Fair Plan has failed to properly investigate or pay for any remediation of the soot, ash and smoke damage. “We sort of celebrated thinking that we we were in this really lucky group of people, only to find out later that that is not at all the case,” said Jordan, 36, who is diabetic and pregnant. “It’s a full-time job, chasing them down, emailing, calling, trying to get communication from them — and their lack of paying what we’re owed. It’s incredibly frustrating and just maddening.” are among 10 victims of the Eaton and Palisades fires who are plaintiffs in a Los Angeles County Superior Court lawsuit filed Thursday against the Fair Plan It’s the first mass tort case against the plan that has arisen out of the Jan though the insurer has faced litigation in Los Angeles and elsewhere in California over smoke damage claims The lawsuit accuses the Los Angeles-based plan of insurance bad faith and breach of contract through its refusal to properly investigate and pay for the cleanups as required by state law even though “wildfire smoke had transformed their homes into toxic traps with each room and surface caked with invisible Also named as defendants are 10 large California home insurers which operate the Fair Plan along with other licensed state home insurers as a means or providing insurance to property owners who can’t get coverage from regular carriers The suit seeks withheld benefits and damages “We have already heard from hundreds of people who are facing denials and underpayments from the Fair Plan for the massive contamination in their home caused by these wildfires,” said attorney J global managing partner at Edelson in Chicago Among the the named defendants are Mercury, Farmers, AAA and State Farm, the state’s largest home insurer, which has been accused of being stingy itself about how it handles Jan but said in an email that the insurer “pays all covered claims consistent with California law and its policy forms which are approved by the California Department of Insurance.” She added: “Our policy and approach to direct physical loss is consistent with other insurers requires direct physical loss for there to be coverage.” A spokesperson for the Automobile Club of Southern California declined to comment The other insurers did not respond to requests for comment Rex Frazier, president of the Personal Insurance Federation of California, which represents major property and casualty insurers, said the lawsuit represents a “bona fide dispute” over Fair Plan policy language regarding smoke damage. we are unaware of any [California Department of Insurance] regulations outlining the standards for smoke claims,” he wrote in an email “There are different views on what is a compensable smoke claim and there are no state standards We are unaware of any external scientific consensus on this.” The Fair Plan has grown dramatically over the last several years as other insurers have pulled out of fire-prone areas across the state In February, the plan received approval from Insurance Commissioner Ricardo Lara to assess its member companies $1 billion to help pay its Jan. 7 fire claims — with consumers possibly on the hook for nearly half of that under a new department policy. The plan estimates losses of roughly $4 billion from the fires. California The largest home insurer in California seeks approval of a 22% emergency rate hike even as it faces complaints over its handling of insurance claims. The Fair Plan was sued in Los Angeles County Superior Court on April 2 by an Altadena woman with similar complaints about her smoke-damaged home, who alleges she was advised by the insurer to just “pick up a broom and sweep.” The latest lawsuit alleges that as the Fair Plan’s policyholder base increased over the past decade, it sought in 2016 to limit its financial exposure to claims by executing a “deliberate scheme” to insert illegal coverage restrictions in its policies. Specifically, it redefined “direct physical loss” as requiring “actual loss or physical damage, as evidenced by permanent physical changes” to a property — and then allegedly assured the insurance department that the definition would result in no change in coverage or possibly even more. After the new approved policies were issued in 2017, the lawsuit alleges the Fair Plan “began systematically denying wildfire smoke damage claims,” citing the new policy language. After a series of devastating fires, including the 2018 Camp fire that destroyed the town of Paradise in Northern California, the insurance department in January 2021 notified the Fair Plan that this practice was illegal, but the insurer “ignored” the directives, the lawsuit asserts, prompting regulators to conduct a “market conduct” exam of the Fair Plan, according to the lawsuit. The Pasadena Unified School District has filed a lawsuit against Southern California Edison seeking damages for the loss of school buildings and the costs of managing its response to the Eaton fire That exam, cited in the lawsuit and reviewed by The Times, found 418 violations of the California Insurance Code and the California Code of Regulations from January 2017 through March 18 It said the Fair Plan issued a fire policy that did not meet state standards and failed to “conduct and diligently pursue a thorough Similar allegations have spurred several lawsuits across California including cases filed in Los Angeles in 2021 in Alameda County last year and in Butte County last month The 2021 case was a proposed class action led by a resident of Mono County whose home was damaged by soot smoke and debris in the 2020 Mountain View fire He alleged the Fair Plan failed to properly restore his home in the ongoing case “If the Department of Insurance had done in 2022 what we hoped it would do we don’t believe these lawsuits would be necessary,” said attorney Dylan Schaffer who brought all three cases and is working with Edelson Schaffer said the bulletin was only advisory. Michael Soller, a spokesman for Lara, declined to comment on the lawsuit but said the commissioner expects the Fair Plan “to process and pay all claims, including all smoke claims, in line with industry standards and in compliance with all laws.” Sports Climate & Environment California Insurance Commissioner Ricardo Lara approved a California FAIR Plan request for a $1 billion assessment on admitted market insurers to cover claims from the Los Angeles wildfires The FAIR Plan reported it has paid more than $914 million to policyholders to cover claims related to the Palisades and Eaton fires the FAIR Plan received 3,469 claims for damage caused by the Palisades Fire and roughly 1,325 claims for damage caused by the Eaton Fire The claims vary according to the type and amount of coverage and loss Roughly 45% of the wildfire claims are reported as total losses which covers lost rental income due to a covered peril A handful of major California insurers have reported losses in excess of $1 billion from the Los Angeles area wildfires Travelers Companies Inc. announced it will lose an estimated $1.7 billion from last month’s wildfires which swept through the region and destroyed tens of thousands of homes earlier this month wildfires could result in insured losses of up to $40 billion The FAIR Plan’s Accounting Subcommittee and Governing Committee each recommended an assessment of $1 billion – the first assessment on insurers in more than 30 years according to Lara – to enable the FAIR Plan to access additional available layers of reinsurance and maintain operations Lara said member insurers can request to recoup 50% of the assessment paid to the plan if the insurer can show its assessment payment was not subject to reimbursement through reinsurance or other means assessments are based on an insurer’s market share of dwelling and commercial policies from two years ago The FAIR Plan is also accessing reinsurance as a payment mechanism to help pay claims it has met its $900 million deductible and has accessed $350 million in reinsurance The FAIR Plan can access additional layers of reinsurance based on losses incurred and outstanding reserves up to a $5.78 billion limit which includes varying percentages of co-reinsurance To access all layers of available reinsurance the FAIR Plan is responsible for paying up to roughly $3.5 billion The FAIR Plan was established by statute in 1968 as the state’s insurance safety net Every property insurance company licensed in California becomes a FAIR Plan member as a condition of doing business in California The American Property Casualty Insurance Association (APCIA) said the assessments on the admitted market to help fund FAIR Plan wildfire claims means the state must explore other funding options “As wildfires grow in frequency and intensity rebuilding the FAIR Plan’s reserves is critical for long-term stability,” said Mark Sektnan APCIA vice president for state government relations the state must explore a diverse range of funding solutions—including catastrophic bonds and other financial tools—to equitably spread risk and strengthen the FAIR Plan they must be allowed to charge actuarily sound rates.” the Consumer Watchdog called the move a “homeowner surcharge to bailout insurers for FAIR Plan losses.” “The FAIR Plan is in trouble because insurance companies dumped too many homeowners,” stated Carmen Balber “That’s why insurers are on the hook for FAIR Plan losses Homeowners across California should not have to pay a penalty to repair the damage from home insurance companies’ predatory behavior The group said it is exploring legal options to stop what it called a “bailout.” Please tell us what we can do to improve this article Middle class homeowners are going to subsidize wealthy homeowners in Pacific Palisades and Malibu The blame is not with insurers but with Proposition 103 and the Department of Insurance who would not allow the markets to properly price and underwrite property risks in California Δdocument.getElementById( "ak_js_1" ).setAttribute( "value" As California contends with increasingly destructive wildfires and an unraveling property insurance market state officials are racing to shore up the last line of coverage for many businesses and homeowners California Insurance Commissioner Ricardo Lara approved a significant expansion of the California FAIR Plan’s commercial property coverage the insurer of last resort will be required to offer up to $20 million in coverage per building with a maximum of $100 million per location - more than double previous limits The expansion is a centerpiece of Lara’s “Sustainable Insurance Strategy,” a broad effort to stabilize California’s fractured insurance market amid mounting climate-related losses major carriers have pulled back from insuring properties in wildfire-prone regions citing escalating claims and regulatory constraints The FAIR Plan - intended as a backstop for those unable to obtain traditional insurance - has ballooned in response covering more than 350,000 properties as of early 2025 a figure that has nearly tripled over the past five years “This targeted FAIR Plan expansion helps meet the urgent needs of homeowners associations and business owners who are being priced out or left without coverage altogether,” Commissioner Lara said in a statement “It is a short-term solution with long-term benefits,” he finished hopefully The FAIR Plan is a consortium of private insurance companies operating under state oversight it is regulated by the Department of Insurance and supported by mandatory participation from admitted carriers it has shifted from a last resort to a vital tool for coverage in vast stretches of the state - particularly in areas like Los Angeles County where the 2025 Palisades Fire reignited debate over the insurability of entire communities The newly approved coverage levels reflect the demands of a vastly changed property market and commercial developments have struggled to find adequate coverage at any price in high-risk zones Industry leaders say this has impeded housing construction and economic development “Commissioner Lara’s action to expand commercial property coverage is a crucial step for home builders and land developers who have struggled to obtain coverage,” said Dan Dunmoyer CEO of the California Building Industry Association “These reforms bring us closer to a more predictable and reliable insurance marketplace.” The policy shift also aims to reverse a dangerous trend: as more property owners are pushed onto the FAIR Plan the system becomes financially strained and less sustainable Expanding coverage while simultaneously working to reduce overall FAIR Plan enrollment is part of Lara’s broader approach That includes incentives for insurance companies to re-enter the market such as allowing catastrophe modeling and reinsurance costs in rate-setting - controversial reforms designed to give insurers more flexibility when pricing risk Among the beneficiaries of the expansion are homeowners associations which have faced double-digit premium hikes or outright cancellations in recent years Some have been forced to raise dues or cut services while others couldn’t meet lending requirements for refinancing due to insurance gaps “This modernization of the FAIR Plan is a long-overdue win for community associations,” said Stacie Donnelly of the Community Associations Institute “With updated limits and enhanced oversight this reform gives HOAs a path to navigate the changing insurance market.” The agricultural sector - particularly vulnerable to wildfire damage - has also welcomed the move “Access to adequate insurance has become a growing challenge,” said Shannon Douglass “The increase in coverage limits and focus on financial stability offers meaningful relief.” the Department of Insurance has mandated new transparency measures for the FAIR Plan These include publicly reporting the number of policies in high-risk areas The department is also conducting a financial examination of the FAIR Plan following a 2022 assessment that called for major reforms in governance and operations These steps build on earlier actions by Commissioner Lara including doubling residential coverage limits to $3 million in 2019 and allowing more flexible payment options for policyholders Despite these efforts, the road to stability remains steep. According to industry analysts, rising climate risks and decades-old insurance statutes continue to limit private market participation, even as losses mount. Nationwide the frequency of billion-dollar disasters has surged with NOAA reporting a record 28 such events in 2023 alone Lara insists his approach is about both immediate relief and long-term transformation “We are moving urgently but responsibly to create lasting reform,” he said “Every part of my Sustainable Insurance Strategy is designed to deliver stability now and restore competition and choice for California consumers in the future.” The FAIR Plan must implement the new coverage limits within 120 days with notification to brokers expected in the coming weeks the expansion offers a temporary lifeline for those left behind in a market under siege from fire Print The Times found that in the Palisades and Eaton fire zones the FAIR Plan’s rolls shot up last year a combined 47% the number of homes in both areas on the plan nearly doubled from 14,272 to 28,440 Four ZIP Codes in the fire-affected zones enrolled more than a third of their households in the state plan But the backup insurance has not lived up to its promise drawing numerous complaints among policyholders about delays in payments and other issues When Diane Hvolka’s home burned down in January the real estate attorney didn’t lose just her Pacific Palisades residence but a link to her teenage daughter The tragic loss of her only child — whose room she had left untouched — has left her determined to rebuild on her Glenhaven Drive property she’s been stymied by the California FAIR Plan from which she bought coverage last year after her insurer of more than a decade suddenly dropped her “I want to be on the land where my daughter grew up,” said Hvolka who said she was promised a $550,000 check from the insurer in early February that has yet to arrive That Hvolka had to buy a policy from the state’s troubled home insurer of last resort after losing her insurance was hardly unusual, according to a Times analysis of FAIR Plan and California Department of Insurance data. The Times found that in the Palisades and Eaton fire zones, the FAIR Plan’s rolls shot up last year a combined 47%. From 2020 to 2024, the number of homes in both areas on the plan nearly doubled from 14,272 to 28,440. That exceeded, according to the Times analysis, a 40% growth in policies issued statewide last year by the plan, an association of insurers licensed to write home insurance policies in California. For many victims of the L.A.-area wildfires it was the only available insurance: Four ZIP Codes in the fire-affected zones enrolled more than a third of their households in the state plan In 2024, there were 19,171 households on the FAIR Plan in the Palisades fire zone, up 51% from 12,659 households in 2023. The zone is defined by 26 ZIP Codes in and adjacent to the fire perimeter subject to a moratorium issued by California Insurance Commissioner Ricardo Lara after the fire which has blocked insurers from canceling or not renewing policies there were 9,269 households on the FAIR Plan last year The zone includes 31 ZIP Codes in Altadena and nearby communities also within and adjacent to the fire’s perimeter that are subject to Lara’s moratorium on cancellations and nonrenewals The surge in the state plan’s rolls last year doesn’t surprise Joshua Morey a Cypress insurance brokerage with Los Angeles County offices who said he has witnessed the growth on the ground “State Farm has the largest market share. They see State Farm leaving, everyone is going to follow,” said Morey, who testified before the Legislature in January. The Times analysis found that insurers exited not only wildfire-prone areas but also neighborhoods where that wasn’t the case Eighty-nine percent of the ZIPs in the fire moratorium neighborhoods were considered negligible to low fire risk by insurance companies After the fires, State Farm announced it would offer renewals to all Los Angeles County policyholders whose policies had not expired as of Jan but that still left thousands of county households on the FAIR Plan which has been sharply criticized over how it handles fire claims This month, 10 Palisades and Eaton fire victims sued the FAIR Plan alleging that they failed to properly investigate and remediate claims for smoke damage And last week, another group of local fire victims sued multiple California insurers, citing a “nefarious conspiracy” to eliminate competition and force homeowners onto the plan. The devastation caused by the twin blazes has raised fresh questions about whether the state — and its top insurance regulator Ricardo Lara — have done enough to protect homeowners declined to comment on the ongoing litigation but said the plan “pays all covered claims which are approved by the California Department of Insurance.” She added that the plan relies on its “independent adjusters to make recommendations based on what they perceive at a loss location” in accordance with state law The FAIR Plan was established by the Legislature in 1968 to offer basic insurance in urban and fire-prone neighborhoods where it was not available Operated by the state’s licensed home insurers it was not meant to be a large participant in the home insurance market But a string of disastrous wildfires over the last decade has spooked private insurers That left the FAIR Plan with about 556,000 homeowner policies as of March, up from about 235,000 in September 2021, according to its website, making it one of the state’s biggest home insurers and exposing it to large losses. It also had nearly 18,000 commercial policies. The FAIR Plan said it has received about 5,280 claims for damage caused by the Palisades and Eaton fires and has paid more than $2.5 billion to policyholders 7 fires will cost it an estimated $4 billion Multiple neighborhoods in Pacific Palisades saw a sharp rise in the number of households on the FAIR Plan, but Topanga Canyon stands out. The canyon has long been a community where it has been hard to get home insurance. It is densely vegetated and bisected by a lengthy, curvy and narrow thoroughfare that makes egress challenging. Already by 2020, 70% of its households in the 90290 ZIP Code were in the FAIR Plan, a figure that steadily rose to 86% last year — the highest percentage in either fire zone, the Times analysis found. Five percent of households were not renewed in 2023. Although the canyon and its roughly 2,200 homes in the ZIP Code avoided devastation, the Palisades fire still damaged or destroyed 70 structures, the fifth-highest level of destruction in both fire zones. Jaspreet Katrib, 52, and her husband are in some ways typical Topanga Canyon homeowners. They bought their 5,600-square-foot hilltop home, where they live with their son, five years ago. And they have been FAIR Plan policyholders ever since. Their Betton Way home survived the blaze, but it is uninhabitable. Fire damaged their property, including their exterior electrical wiring and water lines, while flames licked at their walls and smoke infiltrated the interior, Katrib said. The couple paid for their own environmental testing, which found soot, ash, char and other contaminants throughout the house, according to a copy of the report reviewed by The Times. California’s Fair Plan, the state’s insurer of last resort, may be unable to pay billions in claims arising from the Los Angeles fires and may require a bailout that could ultimately be paid by homeowners statewide. This month, the couple received a $48,356 payment from the plan, which included $31,153 to repair their pool, but did not account for the other exterior damage — and left them less than $20,000 to do all the remaining work. The FAIR Plan’s settlement calls for the couple to clean rather than replace their insulation, but three private contractors they contacted said it must be removed. All the bids topped $100,000 to remediate the property, with one for $160,000, Katrib said. “It’s been a very emotional experience for us — an emotional roller coaster. It takes days or weeks to get any type of response from the FAIR Plan. And the most difficult thing is we are not even in our home,” she said. Diane Hvolka is determined to rebuild on her Palisades lot. (Eric Thayer / For The Times) Hvolka lives in Marquez Knolls, just north of Palisades Village in the 90272 ZIP Code, which saw the number of homes in the FAIR Plan nearly quadruple from 360 households in 2020 to 1,430 homes in just four years, the Times analysis shows. About 17% of households in the postal code were on the plan as of last year. It is one of 11 ZIP Codes in the fire zones with more than 10% of households on the plan. Hvolka’s ZIP Code experienced Pacific Palisades’ worst losses during the fire, with 5,525 structures destroyed or suffering severe damage, according to Cal Fire damage reports and inspections. Consumer Watchdog sues Insurance Commissioner Ricardo Lara, alleging that rules he issued last year that will allow the California Fair Plan to charge policyholders for losses from the Jan. 7 fires violate state law. Hvolka purchased her four-bedroom, 2,990-square-foot home in 2011, and for years was covered by insurer CSI. When she was notified last spring that her policy would not be renewed, she called around to every insurer she could think of and enlisted the help of a broker — to no avail. “The big names — State Farm, Triple A, Mercury, all of them. I did everything,” Hvolka said, before being forced onto the FAIR Plan, which she heard had happened to many of her neighbors. Hvolka was able to afford only $1.1 million in insurance for her dwelling, $110,000 for her swimming pool and $275,000 in extended coverage, all of which could be used to rebuild. But with contractor costs inflated by the fires, she figures it won’t be enough, even with a $500,000 low-interest Small Business Administration loan she was able to secure — and a decision to downsize to 2,000 square feet. Hvolka is thankful the state plan promptly paid her $300,000 for her belongings and additional money for living expenses, but would like to get all of her other insurance money soon so she can start contacting contractors. Her fiance will cover the gap in construction costs. “I notice a lot of signs of contractors that are doing work. I don’t feel confident enough that they’re going to pay me in order to hire someone ... at this point,” Hvolka said. She is determined to overcome any obstacles because of the property’s ties to her late daughter, Alex. “I can never picture anyone else living there.” Maral Donoyan and Wilmer Harris have the unwanted distinction of living in the 91001 ZIP Code in Altadena, which experienced the worst devastation of any postal code in the Eaton or Palisades fire zone, with 9,123 structures either damaged or destroyed, according to the California Department of Forestry and Fire Protection. The ZIP Code has nearly 1,000 homeowners on the FAIR plan, roughly 7% of the neighborhood. From 2020 to 2024, the number of homeowners on the plan increased by 43%. The couple, both attorneys, said they ended up on the FAIR Plan after Mercury Insurance did not renew their fire coverage last year despite their cutting back foliage and making other improvements to fire-harden the property, where they live with their son, a recent college graduate. Their home on Luna Court in the upscale La Vina development in northwest Altadena survived the fire, but a nearby street was devastated. Their garage partially burned, window seals melted and their home was infiltrated by smoke and ash, they said. “It smelled like the inside of a barbecue pit after a long day of barbecuing,” said Harris, 61, after returning to the 3,900-square-foot house. What happened next stunned them. They said the insurer refused to conduct environmental testing or remediate the smoke damage, suggesting they call the cleaning company Molly Maid. The couple, now in their third Airbnb, have since taken out an SBA loan for more than $200,000 so they can pay for their own cleanup. They also have retained the same law firm that sued the state plan this month over its smoke-damage remediation policies. “The night of the fire we left thinking we had insurance coverage,” said Donoyan, 59. “There was nothing that jumped out at us as to what a crazy ride we were about to take.” What to learn from rebuilding of Paradise after 2018 wildfire? Plenty, says top insurance executive Jan 2025 About this story aerospace and dealmakers in Southern California for the Los Angeles Times He joined the paper in 2015 as an assistant business editor and has overseen finance real estate and Washington business coverage Previously he had been the managing editor of the Los Angeles Business Journal and was a reporter for the Los Angeles Daily News and other outlets Sandhya Kambhampati is a data reporter on the Los Angeles Times Data Desk, where she specializes in statistical analysis and demographic data. She previously worked at the Chronicle of Higher Education, Correctiv and ProPublica Illinois. Send her tips at sandhya@latimes.com. Print Good morning Here’s what you need to know to start your day If California property owners are denied coverage from commercial insurance companies they turn to the state’s insurer of last resort Ratepayers on the FAIR Plan are typically hit with higher premiums for homes and other properties deemed to hold higher risk of catastrophic fire As traditional insurance companies retreated from an increasingly risky California market statewide enrollment in the FAIR plan surged nearly doubling between September 2021 and September 2024 And as Times reporter Laurence Darmiento and data journalist Sandhya Kambhampati lay out in a new Times subscriber exclusive residents in Pacific Palisades and Altadena were part of that swell Among properties in the Palisades and Eaton fire zones the FAIR Plan’s rolls shot up last year by a combined 47% to 28,440 homes nearly double the properties enrolled in 2020 Now many fire survivors who lost their homes are relying on the insurer of last resort to help them recover from their worst nightmare “For many victims of the L.A.-area wildfires it was the only available insurance: Four ZIP Codes in the fire-affected zones enrolled more than a third of their households in the state plan,” Laurence and Sandhya wrote “But the backup insurance has not lived up to its promise drawing numerous complaints among policyholders about delays in payments and other issues.” California’s insurance crisis reaches a tipping point Allstate and State Farm announced they would stop offering new policies for properties in the Golden State Officials from State Farm — the state’s longtime top home insurer — cited “rapidly growing catastrophe exposure and a challenging reinsurance market.” The insurers’ actions were a response to what scientists have been telling us: Human-caused climate change is intensifying wildfires and other environmental disasters on cliffs that don’t stay put and at the edge of the coast as sea levels rise is a business that’s only getting riskier The pullback by big insurers sparked that surge in FAIR Plan enrollment but the state’s exposure grew larger than it was designed to be “The FAIR Plan was established by the Legislature in 1968 to offer basic insurance in urban and fire-prone neighborhoods where it was not available,” they wrote “It was not meant to be a large participant in the state’s home insurance market but a string of disastrous wildfires over the last decade has spooked private insurers.” there are 556,000 homeowner policies and nearly 18,000 commercial policies on the FAIR Plan “making it one of the state’s biggest home insurers and exposing it to large losses,” they added Homes destroyed by the Jan (Eric Thayer / For The Times) The FAIR Plan’s losses could end up costing ratepayers across the state FAIR Plan officials say they’ve received about 5,280 damage claims related to the Palisades and Eaton fires and paid out more than $2.5 billion to policyholders 7 fires will cost it an estimated $4 billion,” they noted In the face of those losses, the program is now seeking a $1-billion bailout which would be initially paid for by assessing commercial insurers that operate in the state policyholders across California could end up paying more as a new state policy would allow State Farm Allstate and other insurance companies to recoup half of their assessments by charging their ratepayers You can read more from Laurence and Sandhya in their Times subscriber exclusive the Trump administration threatens child care for 800,000 kids ‘It is time for you to leave’: DHS mistakenly sends notices to U.S Get unlimited access to the Los Angeles Times. Subscribe here. Dhar Mann, right, talks with his longtime head production manager Ruben Ortiz in one of the stages at Dhar Mann Studios in Burbank. Mann began his career posting videos to YouTube in 2018. (Jason Armond / Los Angeles Times) YouTube turns 20 years old. How it changed TV as we know it the site opened the gates for users around the world to post funny viral videos that could take the internet by storm racking up millions of views and earning some millions of dollars YouTube has evolved into not merely a tech operation How can we make this newsletter more useful? Send comments to essentialcalifornia@latimes.com. leads his signature Intro to Popstar Dance class at the Pickle Factory at the Frogtown Creative compound in early April (Kit Karzen / For The Times) Going out With the L.A. Times Book Festival coming up this weekend we want to know what you’d ask your favorite authors Email us at essentialcalifornia@latimes.com and your response might appear in the newsletter this week On April 24, 1942, singer-actor-director Barbra Streisand was born. In March, The Times’ Jeanette Marantos wrote about a brand-new rose that popped up in Streisand’s garden Only about 2,000 of the hybrid tea rose bushes Check our top stories, topics and the latest articles on latimes.com. Politics The California Legislature could address the issues by limiting the sale of fire insurance to only the FAIR Plan Property owners could be free to purchase related insurance to their current the risk for loss from fire would be spread among all property owners and not just those in high-risk areas especially as high-risk areas seem to now be spread throughout the state He predicts that as environmental catastrophes continue to rise insurance companies would no longer be able to offer insurance on homes and other infrastructure and governments would not be able to bridge the differences mortgage companies could no longer offer mortgages and without those We are already seeing the beginnings of his prediction with insurance companies pulling out of much of California and the state plan having difficulty covering its costs If this is not a call for drastic action on our part as citizens We need to make sure our government acts now in confronting the climate crisis California property and casualty insurers may recover up to half of the $1 billion California FAIR PLAN assessment through a temporary supplemental fee on policyholders The measure is intended to help maintain market stability and coverage availability according to Insurance Commissioner Ricardo Lara If the FAIR Plan seeks an additional assessment to cover losses from the January wildfires in Los Angeles insurers could fully recoup the additional charge from policyholders in the same line Any reinsurance or other reimbursements would take priority Lara approved the FAIR Plan’s request for the assessment on Feb Member carriers will have 30 days to pay once they receive notice vice president for State Government Relations at the American Property Casualty Insurance Association said spreading the assessment across a broader pool of insureds is necessary to reduce pressure on California’s insurance market and prevent widespread policy cancellations vice president of State Affairs at the National Association of Mutual Insurance Companies called the assessment an “unfortunate but critical step to meet urgent consumer needs.” He said insurers are prepared to meet their obligations but emphasized that the long-term health of California’s insurance market depends on state and local government action Martin and Sektnan pointed to the need for regulatory reform under Lara’s Sustainable Insurance Strategy Sektnan also called for expanded funding options for the FAIR Plan including catastrophe bonds and lines of credit as well as actuarially sound rates to support its financial stability FAIR Plan assessments are based on an insurer’s market share of dwelling and commercial policies from two years prior The assessment amount is allocated between the 2024 and 2025 pool years and by line of business The FAIR Plan reported $914 million in paid claims and $3.25 billion in reserves for outstanding claims from the Palisades and Eaton fires Lara’s order approving the assessment noted that the FAIR Plan had $510 million in total retained earnings at the end of 2024 The FAIR Plan triggered the first three layers of its reinsurance tower in January and additional layers through April resulting in a net reinsurance recovery of $1.45 billion for wildfire claims Estimated total losses from the Palisades and Eaton fires stand at $4 billion The FAIR Plan anticipates paying 75% of its reserved $3.2 billion in unpaid losses through May in addition to other claims outside its reinsurance coverage New Mexico Superintendent of Insurance Alice Kane (pictured above) has instituted an interim maximum residential property limit of $750,000 for New Mexico Fair Plan policies is in place while lawmakers consider making higher coverage limits permanent for both personal and commercial policies.  Kane said the increase is immediately necessary as residents work to rebuild homes lost to wildfires The Fair Plan board has approved the measure She said the adjustment is a step toward helping residents obtain home insurance coverage needed for rebuilding efforts.  the provisional approval allows builder’s risk policies to be issued by ZIP code for a one-year term with the option to renew for up to five years when the governor declares a state of emergency according to the superintendent’s office.  Kane also said further action is needed to extend commercial property coverage limits under the Fair Plan New Mexico lawmakers are considering legislation that would increase commercial policy limits to $2 million have expressed concerns about the proposed changes president and chief executive officer of Independent Insurance Agents of New Mexico said insurers may reconsider their presence in the state if required to assume risks beyond their capacity insurers will withdraw from the market if forced into unsustainable practices.  ​the New Mexico Fair Access to Insurance Requirements (FAIR) Plan serves as a vital safety net for property owners unable to secure insurance through traditional markets particularly in high-risk areas prone to wildfires While specific payout figures for 2024 are limited the Office of the Superintendent of Insurance (OSI) has sought a $50 million boost to the state’s Fair Plan to enhance its capacity back in November initially proposed raising personal property limits to $1 million and commercial limits to $5 million The bill has since been amended to reduce those amounts to $750,000 for personal coverage and $2 million for commercial Hunton also said the legislation could lead to higher premiums for policyholders the Colorado Division of Insurance has recently released draft regulations outlining how insurers participating in the state’s new Fair Plan can recover participation fees from policyholders WSBT 22's First in the Morning Anchor Bob Montgomery visited Fair Plain East Elementary in Benton Harbor and surprised 4th grade teacher Ms Brenda Terrell during her parent-teacher conferences (WSBT) — The last "I Love to Read" prize was handed out on Thursday Her daughter and her son also surprised her She encouraged her students to read every evening during the "I Love to Read Challenge." has reported a combined exposure of approximately $4.8 billion due to the Pacific Palisades and Eaton fires in the Los Angeles area The FAIR Plan’s potential exposure is over $4 billion for the Pacific Palisades Fire and more than $775 million for the Eaton Fire according to an update provided to BestWire The FAIR Plan insures about 22% of the structures affected by the Pacific Palisades Fire and 12% of those impacted by the Eaton Fire actual claims following a fire have historically represented about 31% of the total exposure in that area," the FAIR Plan noted The update clarified that "exposure" refers to the total amount of insurance for properties not the actual number of claims or anticipated claim payments the FAIR Plan had received more than 3,600 claims and the FAIR Plan is actively engaging with those who have filed claims with the financial resources in place to ensure all claims are addressed the number of policies under the FAIR Plan increased by 85% year-over-year reaching 1,430 policies in the 90272 ZIP code an area significantly impacted by the fires the FAIR Plan had $377 million available to cover claims according to the California Department of Insurance The plan also has access to a reinsurance tower which could be accessed if claims exceed this amount Any claims beyond the available resources may result in a special assessment of private insurers in California The FAIR Plan can access reinsurance once the first $900 million in claims is incurred various levels of co-insurance come into play with reinsurers and the FAIR Plan sharing up to $5.78 billion in total exposure According to BestLink, the five largest homeowners multiperil writers in California in 2023 based on direct premiums written were State Farm Group (19.92% market share), Farmers Insurance Group (14.93%), CSAA Insurance Group (6.52%), Liberty Mutual Insurance Cos. (6.5%), and Mercury Casualty Group (6.11%). The plan said in a letter to Insurance Commissioner Ricardo Lara that it expects losses of roughly $4 billion from the Pacific Palisades, Eaton and Hurst fires. Established as an insurer of last resort, the plan is backed by California’s licensed property insurers, which are required to pay claims when the plan runs through its funds. However, they can surcharge their own policyholders to recoup some of that assessment under a policy put in place last year by Lara. Lara claimed that his policy would prevent consumers from having to pay the full cost of any plan assessment on their own insurer. He reiterated that position on Tuesday in announcing approval of the $1-billion carrier assessment — which does not mean that insurers can now surcharge their own policyholders. That is a separate decision he has yet to make. “I took this necessary consumer protection action with one goal in mind: The FAIR Plan must pay claims just like any other insurance company. I reject those who are hoping for the failure of our insurance market by spreading fear and doubt. Wildfire survivors can’t cash ‘what ifs’ to pay for food and rent, but they can cash FAIR Plan checks,” he said. the plan can assess its member carriers — once it runs through its reserves reinsurance and catastrophe bonds — up to $1 billion to pay residential claims and $1 billion to pay commercial claims The carriers can then surcharge their residential and commercial customers for half of what they are assessed with the approval of the commissioner (Homeowners could not be surcharged for commercial losses.) The plan said in its letter to Lara that 97% of its L.A Additional assessments could be fully recouped by the carriers from surcharges on their own policyholders with the approval of the commissioner Just two days after the Palisades fire began, legislators introduced a bill that would allow the FAIR Plan to float bonds if the insurer faces “liquidity challenges.” The FAIR Plan said it supports the bill, which has yet to move forward. Los Angeles advocacy group Consumer Watchdog, which opposed Lara’s allowance of policyholder surcharges last year, said it would seek to block any now. It said the surcharge policy was issued in the form of a “bulletin” and not a regulation subject to typical rule-making procedures. “Homeowners across the state shouldn’t be on the hook because insurance companies dumped too many homeowners on the FAIR Plan. We’ll explore every legal option to stop the surcharge if insurers try to make homeowners pay,” said Carmen Balber, executive director of the group. This is the first time the plan, established in 1968, has assessed its members since a series of fires and separate losses related to the 1994 Northridge earthquake. The assessments totaled $260 million, or $563 million in today’s dollars, according to the Insurance Department. They did not result in policyholder surcharges. The issue of whether carriers can assess their own policyholders for a FAIR Plan assessment grew in importance amid California’s home insurance crisis, which has seen insurers stop writing new policies and issue non-renewal notices to existing customers. That has sent desperate homeowners flocking to the FAIR Plan, which offers more limited policies with a $3-million cap on dwelling coverage. The plan’s rolls have jumped from about 200,000 residential policyholders in 2020 to more than 450,000 as of last September, as its potential liabilities — what it could have to pay out under the worst circumstances — tripled to $458 billion. In its letter to Lara seeking approval for the assessment, the FAIR Plan said it has received 3,485 claims for damage caused by the Palisades fire and about 1,314 claims for damage caused by the Eaton fire, with new claims being reported daily. The plan has paid $914 million to policyholders, with 45% of the claims reported as total losses, 45% as partial losses and 10% as fair rental value, which covers lost rental income. That has reduced its cash on hand to $1.2 billion, but the plan said it has other liabilities it needs to pay. The insurer also has $5.78 billion in reinsurance, which is typically acquired from large multinational firms by front-line insurers to protect themselves in the event of a catastrophe. However, that includes a $900-million deductible and co-payments that raise the plan’s cash payouts to $3.5 billion. State Farm General asked Monday for an emergency rate increase averaging 22% saying the Los Angeles County fires have put California’s largest insurer in dire financial straits Lara’s directive last year allows for policyholder surcharges The insurers are assessed pro rata based on their market share State Farm General, the largest home insurer in the state, asked for an emergency 22% rate hike last week due to its L.A. fire losses, which it has yet to disclose but which are believed to be in the multiple billions of dollars. Jon Farney, chief executive of parent company State Farm Mutual, told The Times last month that the Bloomington, Ill., insurer would recoup what charges it could from its own policyholders as allowed under state law. “If there was a FAIR Plan assessment and the ability to pass that surcharge on, yeah, that’s what we would do,” he said. Other insurers that have disclosed L.A. fire losses topping $1 billion include Allstate and Chubb. Travelers said Tuesday that it expects about $1.7 billion of pretax losses from the wildfires, including from residential and commercial policies, as well as assessments from the FAIR Plan and recoveries from reinsurance. There has been some question about whether California’s insurer of last resort – the FAIR Plan – has enough cash on hand to pay for its share of wildfire claims As surplus is inadequate and reinsurance has a deductible that exceeds available cash FAIR Plan [Fair Access to Insurance Requirements Plan] doesn’t have enough surplus for this level of loss – the biggest California wildfire loss to date senior director at Fitch Ratings in an interview with Insurance Journal This means insurers writing business in California ultimately will have to bolster FAIR Plan’s financial position Nearly a year ago, FAIR Plan had $336 billion of property exposure with surplus of just $200 million, and $700 million of cash on hand, said Victoria Roach, who testified before the California Assembly Insurance Oversight Committee on March 13 (Editor’s note: Current figures for this year cannot be confirmed) According to FAIR Plan statistics it has $5.9 billion of exposure to the Pacific Palisades (where the fires are raging) – its fifth highest wildfire exposure concentration By September, FAIR had listed its property exposure as $458 billion, a 61% increase from the previous year. While the total amount of claims the FAIR Plan will face are still undetermined, the overall industry insured price tag could hit $30 billion-$40 billion with economic losses of $150 billion to $275 billion Los Angeles Fires Become Existential Test for California’s Stopgap Insurer “As of September 30, 2024, California FAIR Plan exposure in Los Angeles County was US$112.2 billion with a year-over-year growth of 53%. Los Angeles County exposure represents approximately 23.1% of the entire California FAIR plan portfolio,” according to a blog written by Firas Saleh director of product management at Moody’s FAIR Plan had a surplus of only $200 million and it likely hasn’t risen to sufficient levels over the subsequent year (Some news reports indicate that the surplus has risen to $377 million) “You can never go below your surplus level you need an assessment or you’re bankrupt,” according to Glombicki Glombicki explained that the insurance companies would get assessed a certain figure insurance companies can only pass on 50% to their clients 100% of the first dollar (and up) after $1 billion can be passed along.” Glombicki pointed to a problem with the assessments which all California homeowners insurers must pay “You won’t be necessarily in a fire zone but you can be paying for that risk of being in the fire zone,” he said Another problem for the FAIR Plan is that there could be a reinsurance protection gap “FAIR Plan’s $2.5 billion reinsurance has a deductible of $900 million which is quite crazy when one thinks about it,” said one analyst who didn’t want to be identified FAIR Plan’s reinsurance structure details follow: Glombicki explained that as a result of the structure of the reinsurance tower (see graphic above) FAIR Plan pays co-insurance throughout the $4.85 billion limit FAIR Plan shares the loss in the tower as well (Editor’s note: the co-pays are shown in the graphic as the dark gray boxes on the right-hand side) The FAIR Plan policy count has increased by 35% in the 12 months ending Sept Why has there been such a large level of growth Higher losses and regulatory pricing restrictions led many primary insurers to reduce their exposure to the California homeowners’ market or exit the state altogether Insurers that operate in the state will contribute to the FAIR Plan based on market share which helps spread the risk of high-loss events said Fitch Ratings in its commentary titled “Property Casualty (Re)Insurance Ratings Not Affected by California Fires,” published on Jan “Large catastrophic losses can strain the financial resources of the FAIR Plan potentially leading to assessments or surcharges on participating insurers to cover deficits.” Such large losses can lead to increased premiums or reduced coverage in the private market “as insurers adjust to offset their increased liabilities from FAIR Plan contributions,” the Fitch report continued “The long-term goal is to reduce the FAIR Plan’s market share where policies are underwritten due to high-risk factors Coverage is capped at $3 million per policy which can be inadequate to cover replacement costs,” Fitch continued “Reduction of FAIR market share will only be successful if private insurers are not restricted from adequately pricing for wildfire risk.” Recent regulation in the state aims to increase participation within the admitted market “Per recently issued regulation major insurance companies must increase the writing of comprehensive policies in wildfire-distressed areas equivalent to no less than 85% of their statewide market share whereas there had not been legal requirement for insurers to commit to providing any coverage in high-risk areas,” Fitch explained noting that smaller and regional insurance companies must also increase their writing Further, the California insurance commissioner issued a mandatory one-year moratorium, effective Jan on insurance non-renewals and cancellations for homeowners’ insurance within or adjoining the ZIP Codes of the Palisades and Eaton fires in Los Angeles County regardless of loss “In exchange for increasing coverage the state will let insurance companies pass on the costs of reinsurance to policyholders California was the only state that didn’t allow the cost of reinsurance to be borne by policyholders.” There may be some relief ahead for homeowners as well as the state’s insurers. On Jan. 9, a bill was introduced that aims to assist in issuing catastrophe bonds and help finance the costs of insurance claims increasing the claims-paying capacity of the FAIR Plan The FAIR Plan Stabilization Act (Assembly Bill 226) would authorize the FAIR Plan to request the California Infrastructure and Economic Development Bank “to issue bonds if the FAIR Plan faces liquidity challenges in the event of a major catastrophe such as a wildfire.” Glombicki said the bond scheme might work in terms of delaying the assessment on insurers The question is the timing and how quickly can FAIR Plan get those funds if a bond is issued “I’m not saying it’s impossible; it’s just the timing of doing that becomes more problematic whereas an assessment is immediate.” even the assessments take time because they would occur when homeowners renew their policies Photograph: A home burns in the Eaton Fire in Altadena Accelerating CA’s metamorphosis into the new FL Colorado is preparing to launch its first FAIR (Fair Access to Insurance Requirements) Plan in decades aiming to provide a last-resort insurance option for property owners in high-risk areas The plan is set to begin operations early next year and is projected to cover approximately 1% of the state’s properties primarily in wildfire-prone mountain regions Around half of the eligible residential properties are primary residences the executive director of the Colorado FAIR Plan said that applicants will need to provide proof of rejection from three standard-market insurers to qualify the total insured value of properties that might participate remains uncertain The FAIR Plan will fund its operations through premiums based on actuarially sound rates supplemented by assessments on admitted property carriers These assessments will be determined by market share The funds will cover expenses including underwriting The association is currently working with a broker to design a reinsurance strategy and collaborating with actuarial firm Milliman on overall financial projections Campbell noted that launching the FAIR Plan resembles starting an insurtech company though with more established resources and expertise The plan’s nine-member board includes two consumer representatives with the remaining seats filled by members from the insurance industry “The board and the entire industry are critical to the success of this initiative,” Campbell said She described the FAIR Plan as a market tool designed to improve property resilience potentially making properties more attractive to private insurers over time The Colorado FAIR Plan will primarily cover fire but will offer endorsements for additional perils such as wind with limits of up to $750,000 for homeowners and $5 million for commercial properties Coverage will be offered on an actual cash value basis with options for limited endorsements to extend protections Campbell emphasized the need for scalability noting the plan could start with as few as zero policies or as many as 1,000 The plan aims to remain flexible to address rapid changes “We don’t just have our eye on the launch but on all the months after that,” Campbell said adding that current catastrophe trends create new challenges for the insurance landscape Read More: Industry reaction to FAIR Plan modernization in California executive director of the Rocky Mountain Insurance Information Association and a founding board member of the Colorado FAIR Plan said the state’s insurance market is under pressure “We are at the tipping point where insurers have reduced capacity but are still writing business,” Walker said She noted that factors such as rising repair and rebuilding costs Wildfire remains a primary concern in Colorado where the state forest service estimates half of all dwellings are at high risk Walker pointed to the December 2021 Marshall Fire which destroyed more than 1,000 homes in an area not previously classified as high risk Colorado experienced 400 hail events in 2023 according to the National Oceanic and Atmospheric Administration Consumer advocacy group Consumer Watchdog is suing the California Department of Insurance (CDI) seeking to block insurance companies from passing through Fair Plan assessment costs to ratepayers You have reached the limit for gifting for this month Insurance Insider US is the premier intelligence solution for the P&C insurance market Accessibility | Terms of Use | Privacy Policy | Cookie Policy KQED Live EventsPRX Podcast Garage EventsEvents Around the Bay AreaMember Benefits with KQED LiveVideos from KQED LiveWatch recordings of recent KQED Live events FeaturedThat's My WordAn ongoing exploration of Bay Area hip-hop history See Senior Director of TV Programming Meredith Speight’s recommendations from this month’s KQED 9 Watch recordings of recent KQED Live events Support KQED by using your donor-advised fund to make a charitable gift The $1 billion will be collected from private insurance companies in California to keep the FAIR Plan solvent Insurance companies will be able to pass on $500 million to their policyholders The FAIR plan is a not-for-profit insurer offering coverage to homeowners who can’t get it through normal insurance companies The plan’s liabilities more than doubled between 2020 and 2024 as traditional insurers pulled back from California Industry observers expected that a large fire could wipe out the FAIR Plan’s reserves despite the high premiums charged for coverage “This has been warned for many years Nobody should be surprised that this happened It’s unfortunate,” said Mark Friedlander of the Insurance Information Institute It’s a sign of a stressed and sickly insurance market, he added, placing the blame on outdated 1980s-era insurance regulations that the state finally updated in late 2024 “[California had an] antiquated regulatory environment being addressed by the insurance commissioner’s Sustainable Insurance Strategy,” Friedlander said “It will take several years for that strategy to have full impacts in the market where the market could begin to stabilize.” a senior program officer with United Policyholders a nonprofit that helps consumers navigate after disasters “The most important thing is making sure that the policyholders in the L.A fires have their claims paid out,” she said because for-profit insurance companies can’t be counted on to offer coverage If split evenly among California’s eight million home-owning households, the $500 million would be about $60 per household. However, in guidance issued this week (PDF) to companies by the Department of Insurance Commissioner Ricardo Lara specified that the fee should be a percentage of each policyholder’s premium People with more expensive insurance will pay a larger share When the fees will show up on bills is undetermined and will be hammered out in the coming months The fee will be temporary and cannot be folded into insurance rates The total amount should be collected within two years There is a precedent for supplemental insurance fees Following several seasons of bad hurricanes in the 2000s Florida’s insurer of last resort was bailed out with property insurance policyholders shouldering the entire cost the FAIR plan last needed rescuing three decades ago In 1993, fires consumed parts of Altadena, Malibu and Topanga, some overlapping with the footprint of the January fires in Los Angeles. The 1994 Northridge Earthquake, one of the costliest natural disasters in the nation’s history Thousands of homes were destroyed and freeways collapsed Following the disaster, insurance companies decided they no longer wanted to cover earthquake damage. California was too risky, so they stopped writing policies in the state. The state Legislature created the California Earthquake Authority which provides pricey earthquake insurance and permits standard insurers to exclude earthquake coverage from their property insurance policies only about 13% of Californians who have residential insurance also have earthquake insurance Insurers came back to the state, but more residents are now at risk of being uncovered when the next Big One hits The instability after Northridge could have been a wake-up call about the danger of an unhealthy insurance market following disastrous fires starting in 2017 the market again destabilized to the point of approaching collapse because too many Californians rely on the FAIR Plan “Commissioner Lara has looked at what happened [after those disasters] and decided we didn’t learn the right lesson,” said Michael Soller “We need to stay on and strengthen the mitigation path.” California can’t get to the point where insurance companies don’t want to cover fire damage To learn more about how we use your information, please read our privacy policy. The most common insurance plan on the Island has announced a new policy change that will make it possible to fully insure homes worth over a million dollars The Massachusetts Property Insurance Underwriting Association also known as the FAIR Plan and that 36.6 percent of Island homeowners use has announced on Thursday that homeowners using the insurance will be able to bolster their coverage with an excess and surplus market that rounds out their policy without being penalized the FAIR plan capped coverage at $1 million The latest development comes with many Islanders frustrated about the rising cost of insurance, with some worried they’ll be priced off the Island While the policy change won’t reduce the cost of insurance it will provide additional protections for homeowners relying on the insurance group Owner of Tashmoo Insurance in Vineyard Haven Joe Gervais said he doesn’t see this making a drastic change in the local market “We’re all happy to have more people who want to write home insurance on Martha’s Vineyard This will make the market more competitive,” Gervais said a homeowner who uses their insurance would be able to supplement any rebuilding cost of their home that exceeds the $1 million with a separate policy and the FAIR Plan will support homeowners in pursuing this extra coverage FAIR Plan representatives say that the proposal is part of their effort to provide a system of better coverage for Massachusetts homeowners “This is something that has been in place and has worked fairly well,” general counsel for the FAIR Plan Frank O’Brien said “We took the idea from the North Carolina Beach Plan And what it does — it is a way for us to continue to offer coverage for these risks but also put something in place that people can get covered for the larger risks.” Gervais said it will be a while until homeowners see the effects of this change in the home insurance market but it is something he’ll recommend to clients who qualify and express interest the surplus-lines market has not yet been developed “We’ll have to wait a couple weeks until it’s available,” Gervais said “They’ll see how this works and we’ll revisit this.” in this market $1,000,000 is not unusual and it’s not just a Vineyard issue There are many properties that are standard 3 or 4 bedroom houses in the 1,500 to 2,500 square foot range on the Cape that are selling for over a million The way this is being set up is a bit complicated Given the market a better solution would be for the FAIR plan to reevaluate it’s cap Connecting decision makers to a dynamic network of information Bloomberg quickly and accurately delivers business and financial information Los Angeles wildfire victims brought two antitrust suits against several insurers in the state alleging they forced California homeowners onto the state’s insurer of last resort to increase profits and lower their liability Major insurers, including State Farm and Farmers, colluded as a group to exit market segments, like those devastated by the January wildfires, allege the proposed class action and group action complaints filed Friday in California Superior Court The complaints cite a spike in enrollment in California’s stretched-thin FAIR Plan after insurers pulled back from the Golden State in 2022 and 2023 workflow tools and premium legal & business news Log in to keep reading or access research tools A group of Los Angeles area homeowners have sued the state’s Fair Plan alleging the plan carried out a “deliberate scheme” to deny wildfire smoke damage claims 2025.Kyle Grillot/Bloomberg Two antitrust suits against major home insurers in California filed April 18 alleging a conspiracy to force homeowners onto the FAIR Plan insurer of last resort most likely will end with a settlement rather than a jury trial according to an attorney and law professor who analyzed the case including the expense and magnitude of a discovery process for this case the difficulty of proving conspiracy rather than just an unfair result of rational business decisions by the insurers and the reluctance of defendants to allow the case to reach a jury adjunct faculty member at USC Gould Law School and counsel at Pillsbury Winthrop Shaw Pittman LLP "When you look at the list of insurers sued and this is going to be a reason why the defendants are going to want to settle especially if they're being targeted heavily," Butler said so it's going to be very expensive for them They're going to be searching a lot of files and depositions Already they're looking at a lot of expense if they win The best case scenario is if they get rid of this thing early." The cases brought by Larson LLP and Shernoff Bidart Echeverria LLP in Los Angeles County Superior Court of California name State Farm as the lead defendant along with 21st Century Insurance the defendants like their position on the facts of the case they would file a motion for summary judgment "We no longer assume all the stuff in the complaint is true." However if any documents found in discovery back up the complaint and these insurers are going to be very uncomfortable going before a jury," Butler said "The only thing is they probably won't find something with all of these companies Some companies may be able to get themselves out -- one or two might have a successful motion for summary judgment because they were moved from private policies to the FAIR Plan ended up underinsured in the January wildfires in the Palisades area of Los Angeles and would have been covered for millions of dollars more under their previous policies is by plaintiffs who were forced to pay exorbitant rates on the FAIR Plan for limited coverage Paragraph 182 in Ferrier states "The only plausible reason why the entire marketplace of purportedly competitive insurance suppliers would suddenly andsimultaneously refuse their products to a lucrative segment of the buyer market was the existence of an agreement to drive that buyer segment into even higher-priced FAIR Plan insurance policies that enabled the insurers to continue to profit from these consumers and the broader California insurance market while dramatically reducing the insured's coverages and the insurers' liability exposure Defendants were willing to forgo competition between them for these consumers so that they could be forced en masse into the collectively controlled FAIR Plan with its substantial benefits and illegal gains provided by it to them." The number of FAIR Plan policies on residential properties in the Palisades increased from September 2023 to September 2024 by 85% the defendants in the complaints are likely to point out that all insurance policies on the FAIR Plan have to be approved by the state's regulator "The insurers are going to say they were complying with the regulatory regime and makeup "What are you saying we did that was wrong?" The insurance industry can also point out that the FAIR Plan inherently acknowledges global warming as a fact backing up the industry's statements of increased fire risks that make it more difficult to provide homeowners coverage the point of suing corporate interests is perceived environmental damage," he said "Now we have the corporate industry that's going to be using global warming as its big defense." American Property Casualty Insurance Association (APCIA) the American Property Casualty Insurance Association (APCIA) issued this statement by Stef Zielezienski "APCIA has been sounding alarm bells about the deteriorating conditions in the California property insurance market for years with government officials and in the press consistently opposed the creation and expansion of state property residual plans such as the California FAIR Plan Insurers are ultimately on the hook for the liabilities of such plans As an industry trade whose mission is to serve consumers by promoting healthy private competitive markets APCIA has a right and an obligation to voice those concerns to government protected by the Noerr-Pennington doctrine APCIA fully complies with all applicable anti-trust laws and has legal counsel monitoring every member call and meeting for that purpose and we are going to focus on solving the challenges in the insurance market in California." If there is a single bright spot to be found in the aftermath of the costliest wildfire in California’s history it is that both the property/casualty insurance industry and the independent agents who serve as its personal point of contact with insureds now have a golden opportunity to remind consumers just how effective they can be when disasters occur claims adjusters will be tasked with assessing insured losses among more than 18,000 structures destroyed or damaged in the Eaton and Palisades fires Each case requires the same degree of professionalism and care While it’s often tempting to paint a catastrophe of such magnitude in broader strokes (for example insured losses likely ranging between $20 and $45 billion the destruction spanning acreage three times the size of Manhattan) our focus must remain on serving those who put their trust in our hands Insureds need our industry to respond quickly and efficiently and independent agents must once again rise to the challenge is neither the time for semantics nor for pointing fingers it is a time for solutions–and a new way forward California Insurance Commissioner Ricardo Lara issued an emergency declaration allowing unlicensed claims adjusters to work–overseen by a qualified licensed adjuster or insurer–to share the load in expediting the claims process Carriers will still use their own adjusters or even contract with independent adjusters in handling the deluge of claims In the aftermath of any wildfire declaration of emergency by the governor the commissioner is permitted to impose a one-year moratorium on non-renewals and cancellations in affected areas the department has already issued nonrenewal bans on more than 100 ZIP codes The California Department of Insurance is also urging consumers to begin the claims process by contacting their insurer or agent to try and settle claims before contacting a public adjuster or an attorney The need for patience and empathy among independent agencies and their customer-service reps must be kept top of mind as the claims process mounts Sincere empathy is the hallmark of any successful agency but it must be consistently maintained–and members of those agencies must be cognizant of their own emotional well-being under tense conditions as the claims count grows and agency staff have multiple conversations with insureds on one of the worst days of their lives Agency owners would do well to discuss this challenge with team members and keep an open dialogue with their agency-owner contemporaries to share best practices in claims handling Bear in mind that because FAIR Plan policies are limited to $3 million in coverage for dwellings some homeowners will discover how much they might end up paying out of pocket when increased demand causes rebuilding costs for labor and materials to skyrocket the FAIR plan’s standard policy language limits coverage to actual cash value–basically Delays in rebuilding will also cause payouts to rise for displaced residents forced into long-term housing arrangements Increased demand for such housing is already causing rental prices to swell which will lead to higher additional living-expense claims for carriers–some of which may be limited by policy contractual language the larger question remains: What happens if the insured losses exceed the FAIR Plan’s resources It’s worth noting that the FAIR Plan was never intended to be a state-sponsored insurance fund noted in a blog the plan’s exposure in L.A County was $112.2 billion with year-over-year growth of 53% County exposure represents about 23% of the plan’s portfolio FAIR Plan President Victoria Roach recently reported that the plan has a surplus of nearly $377 million available for claims and expenses not yet incurred with the approximate $1 billion difference reserved for current outstanding liabilities such as loss reserves and expenses The plan does have reinsurance treaties in place with payouts tied to losses exceeding the first $900 million Should the FAIR Plan prove unable to meet its compensatory obligations California insurers are required to help pay those losses through assessments proportionate to their prior market shares For the first $1 billion in personal lines and $1 billion in commercial lines assessments insurers could seek to recoup half their share of the assessments through fees billed to policyholders it remains uncertain just what the plan’s total financial responsibility will be While the plan has nearly $6 billion in exposure to potential loss from the Palisades Fire the plan recently estimated that its total losses might be closer to $3.75 billion–not a small number Lara announced a catastrophe modeling and ratemaking regulation to enable insurers to employ the models in their rate formulations carriers must increase their number of policies in wildfire-exposed areas equivalent to no less than 85% of their statewide market share If insurers can both utilize catastrophe models and pass along the cost of reinsurance in theory it will make it easier for them to write more business in risk-prone areas if insurers can recoup some or all of the cost of purchasing reinsurance enabling them to assume more wildfire exposures Time will tell if insurer appetite and legislative or regulatory action can be brought into balance over the next several years it will prove increasingly difficult–and expensive–to obtain coverage in California which was found at fault for both the 2017 Thomas fire and Woolsey fire in 2018 is under scrutiny for its possible involvement in sparking the Eaton fire Reports show residents saw flames at the base of a tower perched above Eaton Canyon visible in photos and videos shared online If the utility’s equipment is found to have caused the blaze California law requires that the utility pay for the wildfire damages and recover its costs through a regulatory process All agents with insureds affected by the devastation have one thing in common: in the months to come they have the opportunity to show just how compassionate and effective they can be in helping families navigate the slow road to resuming a life of relative normalcy Residences destroyed by the Eaton Fire line a neighborhood in Altadena Trees sway in high winds as the Eaton Fire burns structures Jan Chris Wilson walks through the remains of his home A property burned by the Eaton Fire is seen Thursday The FAIR Plan is an insurance pool that all the major private insurers pay into and the plan then issues policies to people who can’t get private insurance because their properties are deemed too risky to insure is designed as a temporary option until homeowners can find permanent coverage but more Californians are relying on it than ever There were more than 452,000 policies on the Fair Plan in 2024 Under a FAIR Plan request approved by the state Tuesday all insurers doing business in California will have to bear half the cost and can pass on the rest to all policyholders in the form of a one-time fee Insurers can collect that cost in the next two years The state Insurance Department must approve those costs State officials didn’t immediately have details on how large the fee would be the state allowed the plan to send out notices and collect funding from marketplace insurers within 30 days It’s the first time the Fair Plan has sought approval for additional money in more than 30 years “I took this necessary consumer protection action with one goal in mind: the FAIR Plan must pay claims just like any other insurance company,” Insurance Commissioner Ricardo Lara said in a statement “I reject those who are hoping for the failure of our insurance market by spreading fear and doubt,” Lara said “Wildfire survivors can’t cash ‘what ifs’ to pay for food and rent The plan also expects to receive $1.45 billion in reinsurance to help pay out claims It anticipates it will have roughly $400 million left by July 45% of the wildfire claims filed so far are reported as total losses 45% as partial losses and 10% as fair rental value Insurers on Tuesday said they’re committed to helping the recovery process after the fires and that the ability to recoup some of the cost from ratepayers will prevent companies from leaving the state “This is essential to prevent even greater strain on California’s already unbalanced insurance market and avoiding widespread policy cancellations that would jeopardize coverage for millions of Californians,” said Mark Sektnan of the American Property Casualty Insurance Association the largest national trade association for home which opposed a rule that allows insurers to pass off costs to policyholders “Consumer Watchdog is exploring every legal option to stop a bailout if any insurance company seeks to make consumers pay,” Carmen Balber Of the top 20 most destructive wildfires in state history according to the California Department of Forestry and Fire Protection Nevada lawmakers are considering legislation that would establish a FAIR Plan association to provide personal and commercial property insurance in areas where traditional coverage is unavailable Assembly Bill 437 would require all property insurers authorized in the state to participate in the association and share financial obligations based on their written premiums over the past three years FAIR Plan policies would include personal property coverage limits of $750,000 and commercial property limits of $5 million A nine-member board would oversee the association consisting of representatives from mutual and stock insurers a Nevada-based property insurance trade group a trade group representing independent agents The board would be required to meet at least once annually The legislation also grants the state insurance commissioner the authority to assess fees on insurers to establish and fund the association While insurers could recoup these fees from policyholders the bill specifies that they could not be used to justify rate increases The fees would not be classified as premiums for regulatory purposes according to the Insurance Information Institute Colorado was the most recent state to introduce a FAIR Plan ​Nevada has implemented several state-run insurance programs aimed at enhancing healthcare accessibility and affordability for its residents Nevada passed legislation to establish a state-run public health insurance option making it the second state after Washington to do so The program aims to increase affordability in the individual health insurance market by mandating premium reductions over the next five years There is also the Nevada Public Employees' Benefits Program (PEBP) which manages and administers health and life insurance programs for qualified Nevada government employees Money market accounts are similar to savings accounts Unlock financial rewards by signing up for a savings or checking account with a bonus offer Compare trusted real estate agents all in one place Answer a few quick questions and we’ll show you your top credit card options Read in-depth credit card reviews to find out which cards have the best perks and more A HELOC is a variable-rate line of credit that lets you borrow funds for a set period and repay them later Home equity loans let you borrow a lump sum at a fixed rate based on how much of the home you own outright we take the accuracy of our content seriously for Californians with homes in high-risk wildfire areas it may be the only way to financially protect their homes Bankrate’s team of insurance experts is here to explain what Californians considering a FAIR Plan need to know Beginning July 1, 2024, commercial policies will become eligible for the FAIR Plan’s clearinghouse program is designed to help offload FAIR Plan policies to private insurance providers The news was met with some relief by many insurance experts who have long stressed how overburdened the CA Fair Plan is In a statement to a state legislative committee in March 2024 “We are one event away from a large assessment” and “there’s no other way to say it because we don’t have the money on hand [to pay every claim] and we have a lot of exposure.” the FAIR Plan is looking at a potential exposure of $4.77 billion and there is not enough money in reserves to pay out those claims the FAIR Plan would turn to the state’s private insurers to help with the cash call California FAIR Plan insurance is more limited than a standard homeowners insurance policy. But, a FAIR Plan policy can financially protect homeowners from shouldering the full cost of a loss out-of-pocket Though a FAIR Plan typically covers fewer types of losses and offers fewer policy options than a private home insurance plan more coverage can be added at an additional cost earthquake coverage is not included and must be added as an endorsement from the California Earthquake Authority homeowners must meet certain other requirements to qualify for the FAIR Plan Multiple insurance companies limiting or entirely pausing new home insurance policies in California has sent the market careening towards chaos seven of the 12 largest home insurance companies in California by market share have either paused or placed heavy limitations on writing new policies in the state many homeowners across California have had no option but to resort to a FAIR Plan policy FAIR Plan insolvency could also affect homeowners not on the plan Remember: the FAIR Plan is supported by California’s private insurance companies If homeowners on the plan incur widespread losses homeowners with a private policy could potentially see a steep premium increase in order to cover those FAIR Plan losses We would expect insured losses [from the January 2025 wildfires] to run in the billions of dollars given the high value of homes and businesses in the impacted areas Losses will be shared among standard homeowners insurers insurers specializing in high-value excess and surplus homeowners policies commercial property losses could be significant covers your dwelling and other structures on an open-peril basis and offers financial protection for your personal property from 16 different named perils A FAIR Plan home insurance policy can be modified with these endorsements but doing so will increase the cost of coverage: Earthquake insurance is not available through the FAIR Plan. Customers can instead purchase a separate earthquake insurance policy through the California Earthquake Authority (CEA) with around 350,000 to 400,000 estimated FAIR Plan policyholders California’s FAIR Plan offers property insurance for owner- and tenant-occupied buildings condos and rental properties (personal property coverage only) property owners must meet certain criteria FAIR Plan applicants must own a single-family home and the home must meet certain building requirements Some homeowners do not meet FAIR Plan criteria The FAIR Plan does not cover vacant homes that are unoccupied for 50 percent of the year homes with existing damages that have not been repaired and homes that are tied to illegal activity based on state and federal laws homeowners seeking to get onto the California FAIR Plan must demonstrate that they have been denied coverage from the private insurance market multiple times The FAIR Plan was designed as an insurer of last resort and policies are generally reserved for the most high-risk homes in the state Keep in mind that the FAIR plan covers much less than a typical home insurance policy and that homeowners on the FAIR plan usually pay more for less The cost to insure a home can be even more expensive if purchasing policies to complement the FAIR Plan The process of purchasing a California FAIR Plan is pretty simple the process is slightly different than getting a traditional home insurance policy Here’s a brief overview of how to get a California FAIR Plan: On February 13, 2025, President Trump signed a Presidential memorandum announcing the “Fair and Reciprocal Plan” for implementing reciprocal tariffs on countries that impose import duties on goods from the United States The memorandum does not impose any immediate new tariffs on U.S It instead instructs the Office of the U.S Department of Commerce (Commerce) to comprehensively review other nations’ treatment of U.S goods and propose actions that will counter each country’s: USTR and Commerce will undertake their investigation in consultation with the U.S. Department of the Treasury and other specified agencies, after submission of the April 1 reports being developed pursuant to the January 20, 2025 America First Trade Policy Memorandum USTR and Commerce will prepare a report of their findings for the President but no specific deadline has been set for this report the memorandum directs the Office of Management and Budget to assess the fiscal impacts on the U.S including the impacts of any information collection requests on the public This last directive implies that USTR and Commerce may solicit data from the public such as information regarding the impacts of unfair trade practices on American businesses in the course of their investigation and the preparation of their report Along with the memorandum, the Trump Administration also released a fact sheet calling out specific trade practices adopted by U.S Wiley's International Trade and National Security Practices have deep expertise to help clients navigate the global markets and stay ahead of the curve in today’s highly volatile trade environment With sharp insight into shifting policies – especially in Washington – we deliver strategic guidance that shapes the global trade landscape To stay informed on all of the Executive Orders and announcements from the Trump Administration please visit our dedicated resource center below Wiley's Trump Administration Resource Center Our Site uses cookies to improve your experience. Cookies may collect your personal information, such as IP address or device identifier, which we may disclose to our analytics partners. You may opt out of the cookies that are not strictly necessary if you wish. By using this site, you agree to our updated Privacy Policy, Terms & Conditions, and Cookies Policy When you visit our website, we use cookies on your browser to collect information. The information collected might relate to you, your preferences, or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. For more information about how we use Cookies, please see our Privacy Policy Necessary cookies enable core functionality such as security These cookies may only be disabled by changing your browser settings but this may affect how the website functions Some functions of the site require remembering user choices These do not store any personal information for example on a contact form or event registration a cookie might be used to monitor the state of your submission across pages Performance cookies help us improve our website by collecting and reporting information on its usage We access and process information from these cookies at an aggregate level Property insurance capacity in the US is beginning to improve in several regions according to TWFG chairman and CEO Gordy Bunch (pictured above) conditions in California remain challenging he said during the company’s earnings call Bunch noted that California’s property market has not stabilized and pointed to the California FAIR Plan as a key factor He compared the state's residual market to Citizens in Florida and Louisiana during peak stress periods saying it has taken on a disproportionate share of risk He said a rate increase could help rebalance the market Bunch also said developments in California’s property segment are tied to wildfire exposure Filing new programs in the state remains difficult especially when competing with a state-run plan TWFG may explore a wrap-around product for the FAIR Plan if market conditions tighten further Bunch said TWFG has secured access to additional secondary and tertiary property markets TWFG is pursuing expansion after maintaining a limited presence in what Bunch described as a previously volatile market the company is now working with reciprocal and stock insurers to support take-outs from Citizens Property Insurance Corp Bunch said TWFG is more open to participating in the Florida market than it had been in the past ​The Woodlands Financial Group (TWFG) is licensed in all 50 states It operates through 520 retail locations and 14 corporate offices nationwide In 2024 TWFG reported robust financial performance Total revenues for the fourth quarter increased by 30.8% to $51.7 million up from $39.6 million in the same period the previous year Net income for the quarter rose to $8.2 million compared to $5.2 million in the prior year period while contingent income surged by 371.4% to $5.0 million Total written premium for the quarter grew by 20.0% The organic revenue growth rate for the quarter was 20.5% and adjusted EBITDA increased by 91.7% to $13.8 million The California Fair Plan has secured the renewal of its March 1 reinsurance treaty after its losses on the recent Palisades and Eaton fires fell within its coverage Print The huge costs of the historic Los Angeles fires could force a bailout of the state’s insurer of last resort which has just $377 million in reserves and additional reinsurance.To remain solvent California’s Fair Plan may turn to its member insurers for financial help and prompt them to levy surcharges on policyholders the state’s property insurer of last resort was born of smoldering ashes — not of a wildfire but of one of the worst urban disturbances in U.S The Watts riots in 1965 damaged or destroyed more than 600 buildings causing insurers to flee and highlighting the need for a new type of carrier to step in Established by the Legislature to also cover communities at risk for wildfires, the plan has proved resilient, paying out billions of dollars over the decades, including after the 2018 Camp fire that destroyed the town of Paradise and cost insurers $12.5 billion Now, however, the FAIR Plan is facing its biggest crisis since the 1994 Northridge earthquake, when it was bailed out by the state’s licensed property insurance companies, which operate the plan and provide it with a financial backstop. Before the devastating fires burned across Los Angeles many homeowners learned they were losing their insurance policies Some faced big increases in premiums that they couldn’t afford The temblor caused some $15.3 billion in insured losses for the industry or roughly $33 billion adjusted for inflation the Palisades and San Gabriel Valley’s Eaton fires alone are expected to be costlier CoreLogic, a leading property data and analytics firm, estimates the losses of those fires at $35 billion to $45 billion not including the other smaller blazes that broke out The fires have damaged or destroyed more than 12,000 structures and killed at least 27 people Many homeowners in the fire zones were on the FAIR Plan after insurers pulled back from California’s troubled insurance market Forking over billions of dollars could wipe out the plan’s $377 million in reserves as well as $5.78 billion worth of reinsurance the FAIR Plan announced Friday it had The reinsurance requires the plan to pay the first $900 million in claims and has other limitations the plan could be forced to lean on its member carriers might levy surcharges on their own policyholders to pay for any assessments wildfires are on track to be the costliest natural disaster in California in modern times,” said former state Insurance Commissioner Dave Jones the FAIR Plan faces extraordinary financial challenges with covering the risks private insurers are declining to cover because of climate change.” FitchRatings estimates the total value of the reinsurance at $2.6 billion, which along with the plan’s minimal surplus capital, will necessitate an assessment. The insurer offers basic insurance to rebuild after a fire, as well as coverage for personal property and expenses incurred while a home is rebuilt, and some optional protections. However, it can be costly and dwelling coverage is capped at $3 million. Further, the plan recommends policyholders consider buying additional private insurance for floods, earthquakes and other uncovered losses, including theft and liability. It’s unclear what the FAIR Plan’s final bill will total, but its statewide exposure to financial losses has tripled to $458 billion over the last several years, according to the plan’s website. During that time, hundreds of thousands of homeowners, especially in foothills and other neighborhoods at high risk for fires, have piled into the plan as insurers have pulled back from the market over growing wildfire losses. Based on preliminary estimates released Friday, the plan said that it has insured 22% of the structures within the Palisades fire zone as defined by the state Department of Forestry and Fire Protection, giving it a potential loss exposure of more than $4 billion. And it has insured 12% of the structures in the Eaton fire zone, giving it a potential exposure there of more than $775 million. So far, the plan said it has received 3,600 claims but expects that number to grow and has boosted staff to handle the volume. It said it typically receives claims representing 31% of its total exposure, but its actual losses can be different. “Our No. 1 focus remains on serving our customers and ensuring all covered claims are paid. The Southern California wildfires have been devastating for families and communities, far beyond the loss of property,” it said. The massive fires that have destroyed much of Pacific Palisades and demolished thousands of homes and structures in Los Angeles County threaten an effort to fix California’s troubled home insurance market signed up for the FAIR Plan last year after State Farm which had insured them for more than a decade personal property and loss-of-use coverage they had for their home on Fiske Street which burned down near the heart of Pacific Palisades They were able to get similar coverage for their dwelling — a little under $2 million — but their personal property coverage was slashed from $1.55 million to $153,000 and their loss-of-use insurance which will cover their living expenses while their home is rebuilt also dropped sharply from $620,160 to $153,000 has been the inability to get a timely payment for living expenses “I just finally got a phone call Wednesday from my claims manager — eight days after the fire started and I was told that they are trying to give an advance of a six-month payment which for us would be a total of $52,038,” said Fahn who has been living in a Century City hotel with her husband a friend received a $75,000 payment within days of the fire from her commercial carrier The last time the plan faced such a financial catastrophe was after the 1994 earthquake The plan assessed its members $260 million for wildfire and earthquake costs according to the state Department of Insurance leading to the establishment in 1996 of the California Earthquake Authority a not-for-profit that now provides about two thirds of the state’s earthquake coverage Those reforms are just getting underway but one controversial provision intended to bolster the FAIR Plan’s finances in the event of a catastrophe could burden homeowners statewide with the cost of any bailout. The measure allows the plan to assess its member carriers — once it runs through its reserves, reinsurance and catastrophe bonds — up to $1 billion to pay residential claims and $1 billion to pay commercial claims. The carriers could then surcharge their residential and commercial customers for half of what they are assessed. (Homeowners could not be surcharged for commercial losses.) Insurers also can surcharge policyholders for 100% of assessments in excess of those amounts. Any surcharges would require the approval of the insurance commissioner. Consumer Watchdog — which wrote the 1988 ballot measure that provided for an elected insurance commissioner with the authority to review and turn down insurer rate requests — called the provision an industry bailout last year. The group said existing law did not allow for the surcharges. Lara maintained it did and said he was offering consumers some protection. “For us, it’s pretty simple. Homeowners across the state should not be on the hook for the L.A. fires because insurance companies abandoned those neighborhoods and dumped homeowners on the FAIR Plan,” said Carmen Balber, executive director of the Los Angeles consumer group. Lara’s spokesperson, Michael Soller, said he could not comment on whether the commissioner would approve any surcharges but noted the provision calls for the FAIR Plan to run through all its financial resources before any assessment can even be considered. “That adds another layer to prevent us from ever getting to a place where they have to pass costs along,” he said. There were no homeowner surcharges after the Northridge earthquake. Some residents began to assess the damage to their homes as firefighters appeared to turn a corner in containing the blazes But officials warned there would be much work to be done The FAIR Plan in its update said that if it needs to assess its member carriers it would be based on their market share in 2023 but it has not yet reached that determination said Thursday it will offer renewals to all of its 250,000 L.A County residential policyholders slated to have been dropped not just those in fire ravaged neighborhoods chief executive of parent company State Farm told The Times last week that the Bloomington insurer would recoup what charges it could from its own policyholders as allowed under state law “If there was a FAIR Plan assessment and the ability to pass that surcharge on Mercury Insurance, one of the state’s largest home insurers, announced a week after the fires started that its initial analysis showed its losses would probably exceed the $150 million it must pay before its reinsurance kicks in and covers higher losses It also said its reinsurance would cover any FAIR Plan assessment The company declined to say whether it would surcharge its customers who a company spokesperson said “will set out guidelines.” The idea that millions of Californians who live nowhere near the Los Angeles County fires could face surcharges on homeowner policies — that in some instances already have risen by hundreds or thousands of dollars over the last several years — has sent lawmakers in Sacramento scrambling for an alternative Just two days after the Palisades fire began, legislators introduced a bill that would allow the FAIR Plan to float bonds if the insurer faces “liquidity challenges.” The FAIR Plan said it supports the bill. “The most important question for us right now is: ‘How can we help?’” Assembly Speaker Robert Rivas said in unveiling the legislation sponsored by two Southern California lawmakers. A spokesperson for Gov. Gavin Newsom said, “The climate crisis has changed everything” and that the governor and insurance commissioner were still trying to assess the effects of the fires on the plan but would be “vigilant as the FAIR Plan explores the options they have to make sure impacted Californians have their claims paid.” Jones, the former insurance commissioner, is dubious that floating potentially billions of dollars of tax-free bonds to pay claims will solve the crisis, although they would be very helpful in making sure there is money available to pay FAIR Plan claims. “Bonds will help them pay off the claims as they come in, but they have got to be able to pay off the bonds. And the only way they’re going to be able to pay off the bonds is with an assessment if they run out of money,” he said. “Bonds are not a magic wand.” Times staff writer Ben Poston contributed to this report. Your support helps make our show possible and unlocks access to our sponsor-free feed What's going on with the FAIR plan in a post-Eaton and Palisades fires California What's the backstory to the frozen Consumer Financial Protection Bureau And why are the two tech bros very publicly going at it Related episodes: How a consumer watchdog's power became a liability For sponsor-free episodes of The Indicator from Planet Money, subscribe to Planet Money+ via Apple Podcasts or at plus.npr.org Fact-checking by Sierra Juarez. Music by Drop Electric. Find us: TikTok, Instagram, Facebook, Newsletter Become an NPR sponsor Please enable JS and disable any ad blocker California legislators are pursuing greater oversight of the California FAIR Plan Association the state’s insurer of last resort for property coverage as the threat of wildfires continues to grow Assemblymember Lisa Calderon has introduced Assembly Bill 234 ex officio members to the FAIR Plan’s governing committee in an effort to enhance transparency the speaker of the assembly and the chair of the senate committee on rules would join the nine-member committee currently composed of insurance carrier representatives The committee also includes four non-voting members representing agents the FAIR Plan has seen rapid growth in recent years and concerns have been raised about its ability to cover claims in the event of a catastrophic fire allowing it to take effect immediately upon passage The legislation is part of broader efforts to address challenges posed by California’s wildfire risks aims to strengthen the financial stability of the association The act would authorize the California Infrastructure and Economic Development Bank to issue bonds and provide the FAIR Plan with access to a line of credit if liquidity issues arise Calderon described AB 226 as a measure to reduce uncertainty for policyholders in the event of solvency concerns “It would also provide a financial buffer for the FAIR Plan by allowing it to seek a line of credit if they need it,” Calderon said She emphasized the importance of finding solutions to support Californians in securing affordable insurance noting the state’s leadership in many areas which ranked as the fifth-largest in the world in 2023 the California Department of Insurance (CDI) has implemented moratoriums on policy non-renewals and cancellations in ZIP codes impacted by wildfires The department is also collaborating with Los Angeles District Attorney Nathan Hochman on a campaign to combat insurance fraud targeting wildfire victims This initiative includes raising fraud awareness and providing support to survivors navigating the recovery process As of 2023, the five largest homeowners multiperil insurers in California, based on direct premiums written, were State Farm Group (19.92%), Farmers Insurance Group (14.93%), CSAA Insurance Group (6.52%), Liberty Mutual Insurance Cos The Colorado Division of Insurance has released draft regulations outlining how insurers participating in the state’s new Fair Plan can recover participation fees from policyholders.  The state established the Fair Plan in 2023 as an insurer of last resort and aims to launch the program in early 2025 executive director Kelly Campbell (pictured above) said The plan is expected to cover approximately 1% of properties in the state.  Insurers are not required to recover participation fees those choosing to do so must apply a “fair and equitable” premium surcharge over a five-year period across all personal and commercial property policies This surcharge must be disclosed on a policy’s declarations page, according to a report from AM Best Once implemented, Colorado’s Fair Plan is expected to provide coverage for approximately 29,000 properties primarily those in wildfire-prone mountain regions The surcharge must be calculated according to the Fair Plan’s plan of operation Insurers must submit a rate filing for approval by the insurance commissioner at least 90 days before implementing the surcharge If the surcharge amounts to less than 1% of the premium insurers may request a shortened recoupment period.  State lawmakers are also considering House Bill 25-1205 which clarifies that the Fair Plan is not an insurance company a person engaged in the business of insurance The bill states that the Fair Plan is responsible for its own debts and obligations.  The proposed legislation would also grant immunity to Fair Plan directors and other department officials for actions taken on behalf of the plan Legal action would be limited to breaches of contract or common law claims.  The insurance department is accepting public comments on the draft regulations until Feb The number of California FAIR Plan policies in Los Angeles' Pacific Palisades area surged 85% year-over-year according to data from the California FAIR Plan This significant increase comes as the area suffers extensive damage from one of the wildfires currently burning across Los Angeles reported having $377 million available to pay claims as of last week according to the California Department of Insurance (CDI) The plan also has access to a reinsurance tower for additional financial support claims surpassing these resources could trigger a special assessment on private insurers providing property coverage in California According to AM Best the FAIR Plan has not yet provided specific loss estimates related to the ongoing fires the organization noted that claims outcomes depend on the type and amount of coverage and the scale of the losses the FAIR Plan’s financial condition evolves daily The organization stated it continues to monitor its financial status to determine if additional payment mechanisms will be needed to cover all claims Aerial assessments from the California Department of Forestry and Fire Protection (Cal Fire) on January 15 indicated that the Palisades Fire may have damaged or destroyed approximately 5,000 structures Read More: Public utility proposes self-insurance programs for wildfire risks officials confirmed the destruction of 2,101 structures and damage to nearly 400 others continued to threaten an estimated 12,250 structures The increase in FAIR Plan policies reflects growing concerns about wildfire risk in the region the FAIR Plan covered 360 residential policies in the Pacific Palisades area the FAIR Plan reported a year-over-year increase of 49,823 residential policies in 2023 bringing the total to 324,954 – a rise of 18% This growth expanded the FAIR Plan’s share of residential policies to 3.7% Cal Fire has provisionally ranked the Palisades Fire as the fourth-most destructive wildfire in California’s history based on early estimates of over 5,000 structures lost The most destructive wildfire remains the 2018 Camp Fire which destroyed more than 18,800 structures market shifts and the ongoing natural disasters hitting California have led to a 276% increase in policies written by the FAIR Plan from 2018 to 2024 Thanks to wildfires and property insurance challenges more and more people are turning to the FAIR Plan as the only option out there – something that’s having a knock-on effect on the sector as a whole managing partner at Norwood Associates and CIWA lobbyist didn’t sugarcoat the precarious state of California’s insurance ecosystem “The FAIR Plan is suitable as the insurer of last resort,” he said Its maximum cap of $3 million forces many homeowners – particularly those with high-value properties – to turn to the non-admitted market for supplemental policies “The FAIR Plan only writes fire insurance,” Norwood said “The other coverages you would normally get in your homeowner’s policy you have to go out and get a wraparound policy did people get a wraparound policy?” And the numbers are stark; the FAIR Plan has $460 billion in statewide exposure they hold $6 billion of exposure,” Norwood said Yet only about $3.8 billion is within the fire map – around 22% of properties in that area “They’re not an insurance company,” Norwood said unlike traditional insurers with mandated reserves reinsurance and the ability to assess the broader industry The industry-wide implications of this setup are hard to ignore Norwood didn’t shy away from addressing the risks: “If you’re one of the big companies exposed and all of a sudden between their claims and the assessment that causes a solvency issue for them is another significant problem – one that inflation has only made worse “The main driver of underinsurance is inflation the surge in cost of labor to rebuild,” Norwood said He described how these economic pressures have intersected with natural disasters to create long-lasting impacts pointing to the aftermath of the 2018 Camp Fire in Paradise only 20% of the homes are rebuilt right now Norwood also highlighted the cascading effects on communities Rebuilding delays and soaring costs often lead to gentrification “The time it takes leads to a re-gentrification of those areas,” he said They’ll sell the property and move on.” “These investors come in making offers to people Residents make the decision to sell and off they go to another part of LA to live.” The FAIR Plan’s structure – entirely reliant on reinsurance and industry assessments – amplifies the challenges of disaster recovery “We’ll see where that goes to the extent that their reserves are essentially their ability to access reinsurance and assess all the other member companies,” Norwood said He stressed the strain this model could place on already-taxed insurers and questioned its sustainability in the face of compounding risks.  Adding to the strain is the rising cost of rebuilding homes after disasters a burden that disproportionately affects communities in fire-prone areas “Every contractor in the state is going to come down here to set up He made it clear that these rising costs and delayed timelines don’t just impact individual homeowners – they also reshape entire regions “It’s a massive cleanup effort,” he said. The FAIR Plan may stabilize in the short term but the long-term challenges of underinsurance and strained industry resources demand more robust solutions “It’s not coming tomorrow,” Norwood said “It’s going to come over a period of time.”  Colorado’s Division of Insurance (DOI) has released draft regulation detailing the process for private carriers to recoup assessment costs they pay to prop up the state’s brand-new Fair Plan, which is expected to launch this year