A Senate committee approved a measure Wednesday to overhaul a state-run property insurer, despite some Republican concerns about government involvement in the private insurance market. The proposal, aimed at bolstering property insurance accessibility across New Mexico, follows the devastating Ruidoso wildfires last summer.
Representative Harlan Vincent (R-Ruidoso Downs) highlighted the challenges in securing insurance coverage in the aftermath of the Ruidoso fires, which destroyed over 1,000 structures and claimed two lives. He emphasized the difficulties faced by residents trying to rebuild. The impact extends beyond the burn scar. An actuary from the state’s Office of the Superintendent of Insurance testified that premiums from the state’s ten largest insurers increased, on average, between 50% and 60% since 2022.
Since 1969, New Mexico has operated a Fair Access to Insurance Requirements plan, commonly known as a FAIR plan. This plan currently provides coverage up to $350,000 for homeowners who have been denied insurance in the private market. With approximately 1,600 policyholders, the FAIR plan is considered “the insurer of last resort.”
The recent fires in Ruidoso depleted the FAIR plan’s funds, requiring the Office of the Superintendent of Insurance to levy an $8 million charge to private insurers statewide to cover costs. According to Kane, policyholders across the state will face a small surcharge on their insurance bills to help insurers recoup these costs. The FAIR plan is overseen by a board composed of industry leaders. Over the past 50 years, the board has seldom increased coverage limits or premiums, even as policy cancellations and non-renewals have increased within the industry, and replacement costs for homes have risen sharply, particularly after the COVID-19 pandemic.
Senate Bill 81 seeks to address these issues by raising coverage limits to $1 million for homes and $5 million for commercial properties, along with a related premium increase. It also proposes expanding the FAIR plan board to include a climate scientist, a consumer advocate, a catastrophic risk management expert, and other specialists. Sponsors are also seeking $50 million from the state’s general fund to ensure the FAIR plan has sufficient reserves, particularly in the event of another catastrophic disaster. This amount includes $1 million for administrative expenses, $9 million for homeowners’ wildfire mitigation grants, supplemented by $40 million for claims payments early in the program’s lifecycle.
Senator Peter Wirth (D-Santa Fe), a bill sponsor, noted that constituents in his district, while not directly affected by a catastrophic wildfire, are experiencing the effects of higher premiums and insurers leaving the market. He stated the bill is essential to ensuring more people have access to the coverage they need.
A fiscal impact report projects that the bill would attract an additional 2,500 policyholders, increasing the total to over 4,100. Wirth emphasized the importance of wildfire prevention measures, stating, “One of the lessons here is, regardless of this legislation, every one of us needs to be aware of the risks that are out there.”
Senator Pat Woods (R-Broadview) expressed skepticism about the state’s potential liability and the continued use of general funds to address future catastrophes. He questioned why private insurers aren’t being required to offer coverage to those who are now seeking FAIR plans. “I’m still concerned that we’re trying to get into the insurance business,” he said.
The committee voted 7-4 to advance the legislation to the Senate floor.
Governor Michelle Lujan Grisham has also proposed a plan to “provide coverage to any New Mexican who needs it,” potentially creating a state-run fire insurance program separate from the private market and the FAIR plan. The filing deadline for new legislation is approaching. According to spokesperson Michael Coleman, the governor’s plan would require initial state funding to establish adequate reserves, with the state assuming limited liability. It would also mandate risk mitigation around properties for coverage eligibility.
