California’s last-resort fire insurance provider, the FAIR Plan, is imposing a special charge of $1 billion on insurance companies to ensure it stays solvent as it covers claims from victims of the Los Angeles County fires. The fee will be passed along to homeowners through temporary fees added to their insurance bills, marking the first time insurance companies have imposed such an assessment directly on customers.
The FAIR Plan, which provides fire insurance to property owners who can’t find coverage elsewhere, has seen its customer base grow dramatically in recent years as insurance companies increasingly refuse to write or renew policies in California. The plan now has over 451,000 policies and is facing significant financial strain due to the recent LA fires.
The FAIR Plan’s president, Victoria Roach, had warned of its ability to pay claims in case of catastrophe, stating that the plan was “one event away from a large assessment.” As of February 9, the plan has paid over $900 million in claims. The new assessment will put the FAIR Plan at an estimated cash position of just under $400 million by July 2025.
Insurance companies will need to submit filings with the insurance department before they can collect the one-time fees from their customers. The fee is expected to be passed along to policyholders, but it’s unclear what percentage of premiums will cover the cost.
The FAIR Plan’s move is supported by the insurance industry, which sees it as essential to prevent strain on California’s already unbalanced insurance market and avoid widespread policy cancellations. However, consumer advocacy group Consumer Watchdog is considering suing over the new fee, calling it a “bailout” for consumers.
Source: https://calmatters.org/economy/2025/02/homeowners-insurance-costs-rising-in-california-fair-plan