California’s FAIR Plan, the state’s insurer of last resort, has received 3,600 claims since wildfires ravaged the Los Angeles area, with potential exposure totaling nearly $5 billion across the Palisades and Eaton fire zones. The plan estimates it covers 22% of structures in the Palisades fire and 12% in the Eaton fire.
FAIR Plan officials say they have the payment mechanisms in place to ensure all covered claims are paid. However, the plan faces a cash shortfall before it can access reinsurance. With $377 million in reserves on hand, FAIR may need to tap into other insurers for financing gaps.
The wildfires are shaping up to be one of the worst disasters in US history, with estimated damage and economic loss ranging from $250 billion to $275 billion. Insured losses could reach $35 billion to $45 billion. Homeowners are bracing for potential surcharges of $1,000 to $3,700 if FAIR Plan runs dry.
The state’s insurance market has seen a surge in demand for fire coverage in recent years, with FAIR Plan exposure tripling to $458 billion. While the plan caps its coverage at $3 million per policyholder, it may not be enough for wealthier homeowners like those affected by the Palisades fire.
Source: https://fortune.com/2025/01/18/fair-plan-la-wildfire-exposure-5-billion-palisades-eaton-claims-payments-reinsurance