California’s Home Insurance Program Requires $1 Billion to Address Wildfire Claims in Los Angeles, Says Commissioner

February 12, 2025 TruthUSA

According to the California insurance commissioner, funding is necessary for the state plan to remain solvent during the upcoming summer wildfire season.

Insurance Commissioner Ricardo Lara announced on Feb. 11 that California’s state insurance plan of last resort, intended as a home insurance safety net, requires an additional $1 billion to cover claims from the wildfires in Los Angeles County that occurred in January.

The additional funds will enable the Fair Access to Insurance Requirements (FAIR) Plan to hire more personnel to process and pay wildfire claims efficiently, completely, and fairly, as noted in a statement. The plan must utilize all available resources, including reserves and reinsurance funds.

“I took this essential consumer protection action with one goal in mind: the FAIR Plan must settle claims just like any other insurance company,” Lara stated in the announcement.

Lara also mentioned that the $1 billion increase would assist the state in funding future claims as the summer wildfire season nears.

Beginning on January 7, the Palisades and Eaton fires scorched over 14,000 acres—approximately 22 square miles—in Pacific Palisades, Altadena, and Pasadena. Firefighters have successfully contained both fires.

In total, 29 lives were lost, and more than 16,000 homes and businesses were destroyed, according to Cal Fire.

AccuWeather experts predict these incidents will result in the most expensive wildfires in U.S. history once all properties are repaired or rebuilt. The damages and economic losses could exceed $250 billion, according to an estimate.

The FAIR Plan, California’s last-resort insurance option, is available to property owners unable to acquire regular home insurance.

Established over 50 years ago, the state plan functions as an involuntary fire insurance pool funded by insurance companies. It serves residents and businesses in both urban and rural areas struggling to secure insurance through conventional insurance providers.

In Pacific Palisades, the FAIR Plan has a potential exposure of $5.9 billion, indicative of the maximum loss faced by an investor. This represents the fifth-largest risk area for the state’s insurance plan.

California Insurance Commissioner Ricardo Lara, a former state senator from Bell Gardens, is seeking another $1 billion from corporate home insurance companies to maintain the state's FAIR Plan, a fire insurance plan of last resort for homeowners who can't get home insurance on the market. (Robin Kemker/The Epoch Times) — California Insurance Commissioner Ricardo Lara, a former state senator from Bell Gardens, is seeking another $1 billion from corporate home insurance companies to maintain the state’s FAIR Plan, a fire insurance plan of last resort for homeowners who can’t get home insurance on the market. Robin Kemker/The Epoch Times

The number of policies under the state plan increased by 60 percent from September 2023 to September 2024, as traditional home insurers continued to reduce coverage throughout California, as indicated by the plan’s data.

On Tuesday, Lara mentioned that the state’s Sustainable Insurance Strategy, which was finalized last year, aims to encourage a shift away from the FAIR Plan as insurance providers expand their policy offerings.

“We need to rebuild with resilience and better prepare for future wildfires through sensible mitigation,” Lara asserted. “My Safer from Wildfires regulation provides a pathway for insurance discounts. We must take steps to enhance the financial stability of the FAIR Plan and avert similar issues from arising in the future.”

Nonetheless, the new regulations may leave FAIR Plan policyholders responsible for covering the additional costs stemming from the Los Angeles County fires, according to Dave Jones, the former state insurance commissioner.

“The reality is, while the FAIR Plan will have sufficient funds to settle claims, it may do so by assessing all California policyholders eventually,” Jones told EpochTV’s “California Insider“ in January. ”If that occurs, individuals might receive an unexpected bill … which could come as a shock to Californians.”

Lara emphasized his strong support for legislation this year that would permit the FAIR Plan to access credit lines and catastrophe bonds for claim payments in dire situations.

The commissioner also indicated he plans to submit the Department’s Report of Examination for ongoing financial review of the FAIR Plan. A 2022 assessment recommended significant reforms in the plan’s governance, operations, underwriting and claims management, risk strategies, customer service, and financial planning policies.

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