The California FAIR Plan, the state's insurance provider of last resort, is requesting an unprecedented $1 billion in additional funding to cover claims from recent devastating Los Angeles wildfires. This marks the first time in over 30 years that the plan has sought such additional funding approval.
The request comes in response to the destructive Eaton and Palisades fires that struck Southern California last month, killing 29 people and destroying nearly 17,000 structures across 37,000 acres. The FAIR Plan has already paid out more than $700 million to policyholders, with approximately 5,000 claims filed from these two fires alone.
California Insurance Commissioner Ricardo Lara approved the request Tuesday, allowing the FAIR Plan to collect funds from insurers doing business in the state. Under the approved plan, insurance companies will bear half the cost but can pass the remainder to policyholders through a one-time fee over the next two years.
The FAIR Plan, which provides coverage to property owners unable to obtain private insurance, has seen its policyholder base double since 2020 to more than 451,000 policies. The total value of FAIR Plan-insured properties has grown from $153 billion in 2020 to over $458 billion as of September 2023.
Consumer advocacy groups have criticized the funding request. Consumer Watchdog's Executive Director Carmen Balber called it a "bailout" and argued that California residents shouldn't have to cover additional costs caused by insurance companies' decisions to drop coverage in high-risk areas.
The last time the FAIR Plan required additional funding was in 1993 following the Kinneloa and Old Topanga fires. That amount, equivalent to $563 million today, covered areas similar to those affected by this year's wildfires.
Commissioner Lara is pushing for new state legislation to allow the FAIR Plan access to credit lines and catastrophe bonds for future claim payments. The plan expects total losses of approximately $4 billion from the recent fires, with nearly half of the claims filed representing total losses.