California Homeowners to Fund FAIR Plan’s $1 Billion Bailout
California homeowners will face temporary fee increases to help cover wildfire insurance claims. Insurance Commissioner Ricardo Lara approved a plan to provide an additional $1 billion in funding to the state’s FAIR Plan, California’s insurance safety net. The FAIR Plan is intended to help ensure that consumer claims are paid after the devastating 2025 Southern California wildfires.
“I took this necessary consumer protection action with one goal in mind: the FAIR Plan must pay claims just like any other insurance company,” Lara wrote. “Wildfire survivors can’t cash ‘what ifs’ to pay for food and rent, but they can cash FAIR Plan checks.”
Members of the FAIR Plan, composed of property insurance companies licensed to operate in California, will also contribute extra funds. Commissioner Lara stated these funds are necessary for the FAIR Plan to meet its obligations to Californians and maintain its financial stability.
According to the California Department of Insurance, the FAIR Plan currently covers approximately 451,000 policies across the state.
Temporary Fees for State’s FAIR Plan
Under the approved plan, often referred to as an “assessment,” the FAIR Plan requested and was granted permission to temporarily increase fees for most California home and fire insurance customers, according to CalMatters. Michael Soller, a department spokesperson, noted that insurance companies must file paperwork with the insurance department before collecting the one-time fees from their customers. The exact percentage of policyholders’ premiums that will be affected by these fees is currently unclear.
In a press release, the FAIR Plan stated that it does not determine how insurers manage costs once the assessment is approved. The California Department of Insurance stated in its press release that this move is consistent with Lara’s Sustainable Insurance Strategy and FAIR Plan modernization order, issued last summer, which set conditions to protect FAIR Plan policyholders and uphold the integrity of the state’s insurance market.
Lara finalized the Sustainable Insurance Strategy in 2024, which is the most significant insurance reform enacted in 30 years. This strategy is designed to increase the issuance of standard insurance policies in higher-risk areas and lessen reliance on the FAIR Plan.
Commissioner’s Actions and Future Plans
Lara has directed the FAIR Plan to take several key actions, including hiring extra staff to ensure the fair, complete, and quick processing and payment of claims. Other key actions include:
- Requiring the FAIR Plan to use all available funds, including reserves and reinsurance funds.
- An agreement was reached in the previous year, which makes insurance companies responsible for half of the set assessment, safeguarding consumers from being held responsible for the entire cost. Subject to the Commissioner’s prior approval under Proposition 103, insurance companies can issue a temporary supplement fee as a percentage of the policy premium. They cannot pass assessment costs on to consumers in future rates.
- Maintaining a healthy FAIR Plan reserve fund for future claims as the summer wildfire season approaches.
- Requiring the FAIR Plan to follow all laws applicable to other insurance companies, including providing advance payments for living expenses and personal property without a detailed inventory.
The FAIR Plan was established by statute in 1968 to act as California’s insurance safety net for property owners who are unable to obtain coverage through standard insurance companies. Every property insurance company licensed in California automatically becomes a FAIR Plan member as a condition of conducting business in the state. Lara anticipates filing the Department’s Report of Examination for an ongoing financial examination of the FAIR Plan, including its compliance with recommendations from the Department’s 2022 Operational Assessment Report, within the coming months.
The most recent FAIR Plan assessments followed the 1993 Kinneloa Fire in Altadena and the Old Topanga Fire in Malibu and Topanga, which affected some of the same areas as the 2025 fires. Those devastating incidents claimed three lives and destroyed nearly 550 structures.
Previous insurance commissioners approved assessments of $260 million, which would be approximately $563 million in today’s dollars. This was done for those fires and the fires that followed the 1994 Northridge Earthquake.
