California FAIR Plan
The California FAIR Plan (California Fair Access to Insurance Requirements) is an fire insurance program created by the state of California that is used by property owners who cannot find private market insurance coverage.[1][2][3] The FAIR Plan was established in 1968 by a statutory amendment to the California Insurance Code (specifically, section 10090 et seq.[4]), and is regulated by the office of the California Insurance Commissioner. The plans are typically more expensive and provide less coverage than commercial plans.[5] If the FAIR Plan does not have the money to pay out all claims, it collects money from insurance companies that operate in California.[5]
According to data from 2020, the FAIR Plan covers 2.5% of the statewide market share, but 20.4% of the market share in ZIP codes at high risk from wildfires.[6] Between 2020 and 2024, the number of homes covered by FAIR Plan policies more than doubled, while the Plan's total exposure (including commercial properties) nearly tripled.[7] Between 2023 and 2024, the number of homes in the ZIP code affected by the January 2025 Palisades fire covered by the FAIR Plan almost doubled.[5]
As of January 17, 2025, the FAIR Plan estimated that it covered 22% of the structures affected by the Palisades Fire, with a potential exposure upwards of $4 billion, and 12% of the structures affected by the Eaton Fire, with a potential exposure of over $775 million.[8] As of January 10, 2025, it had only $377 million available to pay out claims, in addition to $5.75 billion in reinsurance.[9] However, FAIR can only access reinsurance after it has paid out $900 million in claims.[8] To make up the shortfall, according to Consumer Watchdog, all California homeowners could face a $1,000 to $3,700 surcharge as FAIR can seek money from private insurers who would likely pass the charge to their customers.[10][11]
See also
[edit]- Citizens Property Insurance Corporation ("Citizens") similar to California's FAIR in Florida.
- 1988 California Proposition 103
- California Department of Insurance
References
[edit]- ^ Eaglesham, Jean (October 4, 2023). "Homeowners Flock to Last-Resort Insurance Policies". WSJ.
- ^ Darmiento, Laurence (July 30, 2024). "L.A. consumer group calls FAIR Plan insurance reforms an industry 'bailout'". Los Angeles Times. Archived from the original on January 11, 2025.
- ^ Darmiento, Laurence (December 30, 2024). "State takes final step to fix California's troubled home insurance market". Los Angeles Times.
- ^ California Insurance Code section 10090 et seq.
- ^ a b c Flavelle, Christopher (January 8, 2025). "California Wildfires Threaten Insurers Already Teetering From Climate Shocks". The New York Times – via NYTimes.com.
- ^ Boomhower, Judson; Fowlie, Meredith; Gellman, Jacob; Plantinga, Andrew (June 2024). "How Are Insurance Markets Adapting To Climate Change? Risk Selection And Regulation In The Market For Homeowners Insurance". Working Paper Series. National Bureau Of Economic Research. doi:10.3386/w32625. Retrieved January 14, 2025.
- ^ "Key Statistics & Data". The California FAIR Plan. California FAIR Plan Association. Archived from the original on January 15, 2025. Retrieved January 14, 2025.
- ^ a b Ma, Jason (January 18, 2025). "California's insurer of last resort has potential exposure to LA wildfires of nearly $5 billion and reinsurance of $5.78 billion". Fortune. Retrieved January 24, 2025.
- ^ Flavelle, Christopher (January 14, 2025). "The California FAIR Plan Faces Crucial Insurance Test". The New York Times. Archived from the original on January 15, 2025. Retrieved January 14, 2025.
- ^ Adamczyk, Alicia (January 13, 2025). "California homeowners could be on the hook for $1,000 or higher surcharge if FAIR Plan runs dry". Fortune.
- ^ Frank, Thomas (March 18, 2024). "California's insurer of last resort is a 'ticking time bomb'". E&E News by POLITICO. Archived from the original on January 14, 2025.