California FAIR Plan

{{Short description|State-run property insurance program in California}}

{{Use mdy dates|date=January 2025}}

The California FAIR Plan (California Fair Access to Insurance Requirements) is a fire insurance program created by the state of California that is used by property owners who cannot find private market insurance coverage.{{Cite web |last=Eaglesham |first=Jean |date=October 4, 2023 |title=Homeowners Flock to Last-Resort Insurance Policies |url=https://www.wsj.com/finance/homeowners-flock-to-last-resort-insurance-policies-a7ae9439 |website=WSJ}}{{cite web |last1=Darmiento |first1=Laurence |title=L.A. consumer group calls FAIR Plan insurance reforms an industry 'bailout' |url=https://www.latimes.com/business/story/2024-07-30/fair-plan-reform-homeowners-insurance-ricardo-lara-consumer-watchdog |website=Los Angeles Times |date=30 July 2024 |url-status=live |archive-url=https://web.archive.org/web/20250111035409/https://www.latimes.com/business/story/2024-07-30/fair-plan-reform-homeowners-insurance-ricardo-lara-consumer-watchdog |archive-date= 11 January 2025}}{{Cite web |last1=Darmiento |first1=Laurence |url=https://www.latimes.com/business/story/2024-12-30/california-home-insurance-sustainable-insurance-strategy-lara-reinsurance-state-farm-wildfires|title=State takes final step to fix California's troubled home insurance market|date=30 December 2024|website=Los Angeles Times}} The FAIR Plan was established in August 1968 by a statutory amendment to the California Insurance Code (specifically, section 10091 et seq.[https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?division=2.&chapter=9.&part=1.&lawCode=INS California Insurance Code section 10090 et seq.]{{Cite news |title=About - The California FAIR Plan |url=https://www.cfpnet.com/about-fair-plan/ |archive-url=http://web.archive.org/web/20250212174922/https://www.cfpnet.com/about-fair-plan/ |archive-date=2025-02-12 |access-date=2025-02-24 |work=The California FAIR Plan |language=en-US}}), and is regulated by the office of the California Insurance Commissioner. The plans are typically more expensive and provide less coverage than commercial plans.{{Cite web|url=https://www.nytimes.com/2025/01/08/climate/california-homeowners-insurance-fires.html|title=California Wildfires Threaten Insurers Already Teetering From Climate Shocks|first=Christopher|last=Flavelle|work=The New York Times |date=January 8, 2025|via=NYTimes.com}} If the FAIR Plan does not have the money to pay out all claims, it collects money from insurance companies that operate in California.

According to data from 2020, the FAIR Plan covers 2.5% of the statewide market share, but 20.4% of the market share in ZIP codes at high risk from wildfires.{{cite web |last1=Boomhower |first1=Judson |last2=Fowlie |first2=Meredith |last3=Gellman |first3=Jacob |last4=Plantinga |first4=Andrew |title=How Are Insurance Markets Adapting To Climate Change? Risk Selection And Regulation In The Market For Homeowners Insurance |series=Working Paper Series |date=June 2024 |url=http://www.nber.org/papers/w32625 |publisher=National Bureau Of Economic Research |doi=10.3386/w32625 |access-date=14 January 2025 |ref=NBERw32625}} Between 2020 and 2024, the number of homes covered by FAIR Plan policies more than doubled, while the Plan's total exposure (including commercial properties) nearly tripled.{{cite web |title=Key Statistics & Data |work=The California FAIR Plan |url=https://www.cfpnet.com/key-statistics-data/ |publisher=California FAIR Plan Association |access-date=14 January 2025 |url-status=live |archive-url=https://web.archive.org/web/20250115012936/https://www.cfpnet.com/key-statistics-data/ |archive-date=15 January 2025 }} Between 2023 and 2024, the number of homes in the ZIP code affected by the January 2025 Palisades fire covered by the FAIR Plan almost doubled.

As of January 17, 2025, the FAIR Plan estimated that it covered 22% of the structures affected by the Palisades Fire, with a potential exposure upwards of $4 billion, and 12% of the structures affected by the Eaton Fire, with a potential exposure of over $775 million.{{cite web |last1=Ma |first1=Jason |title=California's insurer of last resort has potential exposure to LA wildfires of nearly $5 billion and reinsurance of $5.78 billion |url=https://fortune.com/2025/01/18/fair-plan-la-wildfire-exposure-5-billion-palisades-eaton-claims-payments-reinsurance/ |website=Fortune |date=18 January 2025|access-date=24 January 2025 |language=en}} As of January 10, 2025, it had only $377 million available to pay out claims, in addition to $5.75 billion in reinsurance.{{cite news |last1=Flavelle |first1=Christopher |title=The California FAIR Plan Faces Crucial Insurance Test |url=https://www.nytimes.com/2025/01/14/climate/californias-insurance-fair-plan-fires.html |access-date=14 January 2025 |work=The New York Times |date=14 January 2025 |archive-url=https://web.archive.org/web/20250115074913/https://www.nytimes.com/2025/01/14/climate/californias-insurance-fair-plan-fires.html |archive-date=15 January 2025}} However, FAIR can only access reinsurance after it has paid out $900 million in claims. To make up the shortfall, according to Consumer Watchdog, all California homeowners could face a $1,000 to $3,700 surcharge as FAIR can seek money from private insurers who would likely pass the charge to their customers.{{cite web |last1=Adamczyk |first1=Alicia |date= 13 January 2025|title=California homeowners could be on the hook for $1,000 or higher surcharge if FAIR Plan runs dry |url=https://fortune.com/2025/01/13/california-homeowners-surcharge-fair-plan |website=Fortune |language=en}}{{cite web |last1=Frank |first1=Thomas |title=California's insurer of last resort is a 'ticking time bomb' |url=https://www.eenews.net/articles/californias-insurer-of-last-resort-is-a-ticking-time-bomb/ |website=E&E News by POLITICO |date=18 March 2024 |url-status=live |archive-url=https://web.archive.org/web/20250114230442/https://www.eenews.net/articles/californias-insurer-of-last-resort-is-a-ticking-time-bomb/ |archive-date=14 January 2025}}