Decision Sparks Debate Over FAIR Plan’s Future and Industry Responsibility
California Greenlights FAIR Plan’s : California Insurance Commissioner Ricardo Lara has approved the California FAIR Plan’s request to impose a $1 billion assessment on admitted market insurers to help cover Los Angeles wildfire claims.
The FAIR Plan has already paid out over $914 million to policyholders, including advance payments for claims related to the Palisades and Eaton fires.
Thousands of Wildfire Claims Filed
As of February 11, policyholders have submitted:
- 3,469 claims related to the Palisades Fire
- 1,325 claims related to the Eaton Fire
Losses vary, with 45% of claims classified as total losses, another 45% as partial losses, and 10% involving fair rental value, which covers lost rental income.
Major Insurers Facing Billions in Losses
Several large insurers are reporting significant financial setbacks.
- Travelers Companies Inc. projects $1.7 billion in wildfire losses.
- Industry estimates suggest total insured losses could reach $40 billion.
Why the $1 Billion Assessment?
The FAIR Plan’s Accounting and Governing Committees recommended the assessment to access additional reinsurance layers and maintain operations. Commissioner Lara noted this is the first assessment of its kind in over 30 years.
To help insurers offset the financial burden, Lara announced they can apply to recoup 50% of the assessment, provided their payment is not already reimbursed through reinsurance.
The FAIR Plan has already utilized $350 million in reinsurance after meeting its $900 million deductible. It can access up to $5.78 billion in total reinsurance, but it must contribute $3.5 billion—including deductibles and co-pays—before reaching that limit.
Industry and Consumer Reactions
California Greenlights FAIR Plan’s : The American Property Casualty Insurance Association (APCIA) supports rebuilding the FAIR Plan’s reserves but urges the state to consider additional funding strategies.
Mark Sektnan, APCIA’s Vice President for State Government Relations, emphasized:
“To ensure long-term stability, California must explore alternative funding solutions—such as catastrophic bonds, credit lines, and other financial instruments—to fairly distribute risk and bolster the FAIR Plan’s resilience.”
Meanwhile, Consumer Watchdog strongly opposes the assessment, calling it a “homeowner surcharge to bail out insurers.”
Executive Director Carmen Balber criticized the move:
“The FAIR Plan is struggling because insurers abandoned too many homeowners. Now, insurance companies are responsible for these losses, and consumers shouldn’t have to pay for the industry’s failures.”
Consumer Watchdog is now considering legal action to challenge the assessment.
The Road Ahead
With wildfire risks increasing, California faces mounting pressure to reform its insurance market. The debate over funding the FAIR Plan highlights the ongoing struggle between insurers, regulators, and consumer advocates—a battle that will shape the future of home insurance in high-risk areas.
For more updates on wildfire insurance, visit JacobiJournal.com.
Read the full California FAIR Plan announcement here.