The California FAIR Plan Association is set to expand its home insurance coverage, particularly benefiting homeowner and condo associations.
This change follows an agreement with the California Department of Insurance, aiming to develop a more comprehensive commercial insurance plan.
The plan will extend coverage to farms, builders, businesses with multiple buildings, and homeowner and condo associations.
Deputy Insurance Commissioner Michael Soller highlighted the creation of a “high-value commercial plan” with coverage limits up to $20 mn. This plan is intended to address the insurance coverage gap for homeowner associations and similar entities.
The proposed changes could allow businesses with up to five buildings to receive insurance coverage up to $100 mn.
The FAIR Plan Association has 30 days to draft this new “high-value” commercial coverage option. Once approved by the California Department of Insurance, they have 120 days to submit a filing and another 120 days to make the policy available.
This initiative aims to restore the FAIR Plan’s financial stability and ensure consumers have access to necessary coverage.
Mark Sektnan of the American Property Casualty Insurance Association acknowledged the efforts to balance the insurance market and increase coverage access for Californians.
Insurance Commissioner Ricardo Lara’s proposal also tackles the financial health of the FAIR Plan and management of extreme events, referencing the impact of the 1994 Northridge earthquake.
Under the new proposal, once the FAIR Plan’s reserve funds, reinsurance, and catastrophic bonds are exhausted, insurers will cover half the cost of losses up to $2 bn in total claims.
The remaining costs may be recouped from policyholders, subject to regulatory approval.
The FAIR Plan will also need to meet new transparency and reporting requirements, including informing regulators, the governor, and the state legislature about policy counts, premiums collected in wildfire-prone areas, and market shares. These measures aim to enhance the accountability and operational clarity of the FAIR Plan.
