California’s last-resort home insurance plan has exhausted its funds amid a surge of claims from the devastating Los Angeles fires and will receive a $1 billion bailout, state regulators announced Tuesday.
The financial rescue follows two of the most destructive wildfires in state history, which last month destroyed about 6,800 structures in Pacific Palisades and 9,400 in Altadena. The FAIR Plan, which provides coverage for homeowners unable to secure private insurance, has been overwhelmed with claims. It has already paid out $914 million, a figure expected to rise.
To stay solvent, the plan requested a $1 billion assessment on its member insurers, who are permitted to pass some costs onto policyholders—potentially driving up home insurance rates statewide. California Insurance Commissioner Ricardo Lara defended the move, calling it essential to maintaining the FAIR Plan’s ability to pay claims.
“Wildfire survivors can’t cash ‘what ifs’ to pay for food and rent, but they can cash FAIR Plan checks,” Lara said.
The bailout underscores California’s fragile home insurance market. As climate change fuels more severe wildfires, insurers have retreated from high-risk areas. State Farm, California’s largest insurer, has scaled back significantly, refusing to renew nearly 70% of policies in the Palisades Zip code last year, leaving many homeowners dependent on the FAIR Plan.
Lara expressed confidence that new state regulations would stabilize the market and reduce reliance on the FAIR Plan. “We will move people away from the FAIR Plan,” he said.
The $1 billion assessment is the largest in the FAIR Plan’s history. The last occurred after the 1994 Northridge earthquake, when regulators approved a $260 million bailout (equivalent to $563 million today) for fire-related damages.
As of Feb. 9, the FAIR Plan has received over 4,700 claims for damage from the Palisades and Eaton fires, with 45% reported as total losses.
Source: Washington Post/ Japan News
Bd-pratidin English/ Jisan
