California Lawmakers Respond to Insurance Crisis with New Bills
Following devastating wildfires earlier this year, California lawmakers are taking action to stabilize the state’s insurance market. Several bills are advancing through the legislature, addressing concerns about the financial stability of the FAIR Plan and broader issues within the industry. This follows concerns that another large-scale catastrophe could destabilise an already fragile insurance market.
Strengthening the FAIR Plan
Assembly Bill 226 (AB 226) is a key piece of legislation aimed at bolstering the California FAIR Plan. The FAIR Plan serves as a last-resort insurance provider for many homeowners unable to secure coverage through standard insurers.
The bill would allow the FAIR Plan to request state-issued bonds through the California Infrastructure and Economic Development Bank. This would provide a financial safety net, ensuring claim payments can be made after a major disaster. Dan Dunmoyer, president of the California Building Industry Association, emphasized the importance of the legislation during a recent hearing, stating, “It is very important for this market to stabilize. God forbid we have another fire.”
Assemblymember David Alvarez, a co-author of AB 226 and a Democrat from San Diego, explained that if the FAIR Plan exhausts its funds, the bank could issue bonds to cover claims. This approach aims to manage costs and prevent sudden rate hikes for policyholders. Alvarez described the bill as “quite simple,” adding that it faced no organized opposition and passed unanimously in the Assembly Insurance Committee.
This is an important bill to provide a solution to a growing problem in California’s insurance market.
Assemblymember Lisa Calderon, a Democrat from Whittier and chair of the committee, is also a co-author. AB 226 now moves to the Assembly Appropriations Committee for further consideration.
Addressing a Growing Insurance Crisis
California’s insurance market has been significantly impacted by increasing wildfire risks, leading to a surge in FAIR Plan enrollments. Assemblymember Dawn Addis of Morro Bay noted that participation in the plan has increased by as much as 500 percent in some counties. She has warned that if the plan becomes financially unstable it would have severe consequences, saying, “It is absolutely untenable if this plan is insoluble.” AB 226 is an urgency measure and would take effect immediately if it passes both legislative chambers with a two-thirds vote and receives the governor’s approval.
Additional Insurance Legislation
Lawmakers are also advancing other bills to address the state’s insurance challenges.
- AB 238: Introduced by Assemblymembers John Harabedian and Jacqui Irwin, this bill would allow homeowners in financial distress to request mortgage forbearance by simply declaring a hardship.
- AB 69: Authored by Lisa Calderon, this bill would require insurance brokers to assess if FAIR Plan policies could be transferred to a standard insurance market before renewal.
- AB 488: Introduced by Republican Assemblymember David Tangipa of Clovis, this bill proposes changes to the FAIR Plan’s rate application process by eliminating certain procedural requirements, including a mandate for the plan to publish its toll-free phone number in directories.
With the instability in California’s property insurance market, lawmakers are moving quickly to implement solutions before another disaster creates further pressure on homeowners and insurers alike.
