California’s state insurance plan of last resort, a home insurance safety net, needs $1 billion in additional funding to pay for claims following the Los Angeles County wildfires in January, Insurance Commissioner Ricardo Lara announced Feb. 11.
The extra funding would allow the Fair Access to Insurance Requirements (FAIR) Plan to hire more staff needed to process and pay wildfire claims fairly, fully, and quickly, according to a statement. The plan would be required to use all available funds, including reserves and reinsurance funds.
“I took this necessary consumer protection action will one goal in mind: the FAIR Plan must pay claims just like any other insurance company,” Lara said in the statement.
Lara said the $1 billion boost would also help the state fund pay future claims as the summer wildfire season approaches.
Starting Jan. 7, the Palisades and Eaton fires burned more than 14,000 acres, or about 22 square miles, in Pacific Palisades, Altadena, and Pasadena. Firefighters have fully contained both blazes.
In all, 29 people were killed, and more than 16,000 homes and businesses were destroyed, according to Cal Fire.
Experts at AccuWeather estimate the incidents will become the costliest wildfires in the United States after all properties are repaired or rebuilt. Damages and economic loss could reach more than $250 billion, according to AccuWeather’s estimate.
California’s FAIR Plan, a state-run home insurance plan, is a last resort for property owners who can’t buy market home insurance.
Created more than 50 years ago, the state plan is an involuntary fire insurance pool paid into by insurance companies. It is available for California residents and businesses in urban and rural areas that can’t get insurance through a corporate insurance company.
In Pacific Palisades, the FAIR Plan holds $5.9 billion in exposure, which is the amount that an investor can potentially lose. This is the fifth-largest area of risk for the state’s plan.
California Insurance Commissioner Ricardo Lara, a former state senator from Bell Gardens, is seeking another $1 billion from corporate home insurance companies to maintain the state's FAIR Plan, a fire insurance plan of last resort for homeowners who can't get home insurance on the market. Robin Kemker/The Epoch Times
The state plan’s policies increased by 60 percent from September 2023 to September 2024 as home insurers continued to decrease coverage in the state, according to the plan’s data.
On Tuesday, Lara said the state’s Sustainable Insurance Strategy, finalized last year, would help move people away from the FAIR Plan as insurance companies write more policies.
“We must rebuild stronger and be better prepared for future wildfires through common-sense mitigation,” Lara said. “My Safer from Wildfires regulation provides a pathway for insurance discounts. We must take action to improve the financial standing of the FAIR Plan and prevent this situation from recurring.”
The new rules, however, could leave FAIR Plan policyholders on the hook to pay for the extra costs following the Los Angeles County fires, according to Dave Jones, the former state insurance commissioner.
“The bottom line is, the FAIR Plan will have enough money to pay claims, but the way it will make sure it has enough money is by assessing all California policyholders, eventually,” Jones told EpochTV’s “California Insider“ in January. ”If it gets there, that’s what will happen. People will get an additional bill ... which will come as a big surprise to Californians.”
Lara added he strongly supported legislation this year to allow the FAIR Plan to access credit lines and catastrophe bonds to help pay claims in worst-case scenarios.
The commissioner also said he expected to file the Department’s Report of Examination for ongoing financial scrutiny of the FAIR Plan. A 2022 assessment called for significant changes in the plan’s governance, operations, underwriting and claims handling, risk management, customer service, and financial planning strategies and policies.
Jill McLaughlin
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Jill McLaughlin is an award-winning journalist covering politics, environment, and statewide issues. She has been a reporter and editor for newspapers in Oregon, Nevada, and New Mexico. Jill was born in Yosemite National Park and enjoys the majestic outdoors, traveling, golfing, and hiking.
