The California FAIR Plan Association, a group of all insurers licensed to provide property coverage in the state, has secured approval for an additional $1bn from its member companies.
Insurance Commissioner Ricardo Lara authorized the funding to ensure the Plan can continue paying claims after the Los Angeles wildfires.
In a letter to Lara requesting approval, the FAIR Plan stressed that wildfire claims have created a major financial strain. It outlined the need for a $1bn assessment on member insurers and reaffirmed its commitment to assisting affected policyholders.
As of February 9, 2025, the Plan had received about 3,469 claims for damage from the Palisades Fire and 1,325 from the Eaton Fire. Roughly 97% involved residential properties, while less than 3% were related to commercial structures.
To estimate cash flow, the Plan projected total losses from the Palisades, Eaton, and Hurst fires at just over $4bn. By February 9, it had paid approximately $914mn in losses and loss adjustment expenses (LAE), leaving around $3.125bn in reserves, including incurred but not reported (IBNR) losses.
The Plan reported that 45% of wildfire claims were total losses, another 45% were partial (including smoke damage), and 10% were for fair rental value only.
In its letter to Lara, the Plan urged swift approval of the assessment to meet claims obligations.
To meet the collective goal of paying covered claims as quickly as possible, we respectfully ask you to approve an assessment of all member companies under California Insurance Code section 10094(c) and the Plan of Operation, as approved by your Order 2024-2, dated August 27, 2024. Our Accounting Committee and Governing Committee have approved an assessment of $1bn, which is urgently needed to maintain operations and continue paying policyholders.
Insurance Commissioner Ricardo Lara
Lara granted the request, ensuring the Plan’s ability to pay wildfire claims.
“I took this necessary consumer protection action with one goal in mind: the FAIR Plan must pay claims like any other insurance company,” Lara said. “I reject those trying to destabilize the insurance market by spreading fear and doubt. Wildfire survivors can’t cash ‘what ifs’ to pay for food and rent, but they can cash FAIR Plan checks.”
Lara also pointed to longstanding issues with insurance regulation. “We are facing the same challenge 30 years after wildfires devastated these communities. Three decades of stagnant regulations have put more people at risk. The Sustainable Insurance Strategy I finalized last year will shift policyholders away from the FAIR Plan and encourage insurers to write more policies.”
He emphasized the importance of wildfire preparedness.
We must rebuild stronger and prepare for future wildfires with practical mitigation efforts. My Safer from Wildfires regulation provides a path for insurance discounts. We must also strengthen the financial position of the FAIR Plan to prevent recurrence.
“I fully support legislation to allow the Plan access to credit lines and catastrophe bonds for worst-case scenarios. I urge the Legislature to act quickly and send it to the Governor’s desk.”
The Plan estimated that the $1bn assessment would leave it with about $400mn in cash by July 2025. It expects its reinsurance retention for the 2025-2026 treaty year to be $1.25bn.
The Plan has reinsurance coverage for part of its wildfire losses up to $5.78bn.
“There are multiple reinsurance layers,” the Plan wrote. “The first three require the FAIR Plan to absorb losses up to $900mn before reinsurance covers an additional $350mn. After this initial $1.25bn, additional reinsurance layers are available based on incurred losses and outstanding reserves, up to the $5.78bn limit.”
