California lawmakers are taking steps to improve transparency and strengthen oversight of the California FAIR Plan Association, the state’s insurance provider of last resort for property coverage. This comes as wildfires become an increasing threat, according to a report by AM Best.
Key Legislative Moves
Assemblymember Lisa Calderon has proposed Assembly Bill 234 (AB 234) to add two non-voting members to the FAIR Plan’s governing committee. These members would represent the speaker of the assembly and the chair of the senate committee on rules, bringing new perspectives to the current nine-member committee.
The existing committee is made up of representatives from insurance companies and four non-voting members representing agents, brokers, surplus line brokers, and the public. The latter are appointed by California’s governor.
AB 234 also includes an urgency statute, meaning it would go into effect as soon as it is passed. This fast-tracked approach highlights the pressing need for more transparency as the FAIR Plan faces increased challenges.
Growing Challenges for the FAIR Plan
Over recent years, the FAIR Plan has experienced rapid growth due to rising wildfire risks. However, concerns have been raised about its ability to pay claims in the event of catastrophic fires.
To address these concerns, another proposed bill, Assembly Bill 226 (AB 226), aims to stabilize the FAIR Plan’s finances. Known as the FAIR Plan Stabilization Act, this bill would allow the California Infrastructure and Economic Development Bank to issue bonds and provide the FAIR Plan with a line of credit during liquidity crises.
Statements from Leaders
Calderon explained that AB 226 would act as a safety net for policyholders, reducing uncertainty about the FAIR Plan’s financial stability. “This measure would provide a financial buffer by allowing the FAIR Plan to access a line of credit if needed,” she said.
She also highlighted California’s global leadership in various sectors, including its economy, which was ranked the world’s fifth-largest in 2023. Calderon stressed the need for creative solutions to help Californians secure affordable insurance amid these growing challenges.
Additional State Efforts to Address Wildfire Risks
The California Department of Insurance (CDI) is also taking action to protect homeowners. It has implemented moratoriums on policy non-renewals and cancellations in areas impacted by wildfires. These measures aim to provide temporary relief for affected policyholders.
CDI is also partnering with Los Angeles District Attorney Nathan Hochman to combat insurance fraud targeting wildfire victims. This initiative involves raising awareness about fraud risks and supporting survivors during recovery.
Insights on California’s Insurance Landscape
As of 2023, the state’s largest homeowners’ insurers by market share included:
- State Farm Group (19.92%)
- Farmers Insurance Group (14.93%)
- CSAA Insurance Group (6.52%)
- Liberty Mutual Insurance Cos. (6.5%)
- Mercury Casualty Group (6.11%)
These companies account for a significant portion of the insurance market, making their roles critical in addressing wildfire-related challenges.
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