California Lawmakers Push for Better Oversight of FAIR Plan Amid Growing Wildfire Risks
California Lawmakers Push for Better Oversight of FAIR Plan Amid Growing Wildfire Risks
California legislators are taking steps to strengthen oversight of the state’s insurer of last resort, the California FAIR Plan Association. With wildfires becoming a growing threat, new legislation aims to enhance transparency and financial stability for property insurance coverage.
Assembly member Lisa Calderon recently introduced Assembly Bill 234 (AB 234) to improve governance within the FAIR Plan. This bill would add two non-voting members to the plan’s governing committee, boosting transparency and bringing in more diverse perspectives. These new members would be the Speaker of the Assembly and the Chair of the Senate Committee on Rules—or their designated representatives.
Calderon also introduced another key proposal: the FAIR Plan Stabilization Act (AB 226). This act is designed to protect policyholders by bolstering the financial stability of the FAIR Plan. It would give the California Infrastructure and Economic Development Bank the authority to issue bonds and provide the FAIR Plan with access to a line of credit if liquidity issues arise. Calderon described it as a “financial buffer” to reduce uncertainty and ensure the plan’s ability to meet its obligations.
Supporting Californians in Challenging Times
Calderon stressed the importance of finding solutions to help Californians secure affordable insurance, noting the state’s leadership in areas like economic innovation. (California’s economy was the fifth-largest in the world in 2023!)
Wildfires have only made property insurance more complicated. The California Department of Insurance (CDI) has taken steps to protect homeowners, including issuing moratoriums on policy cancellations and non-renewals in wildfire-affected ZIP codes.
In addition, CDI is teaming up with Los Angeles District Attorney Nathan Hochman on a campaign to combat insurance fraud targeting wildfire survivors. This initiative aims to raise awareness about scams and provide support for those recovering from wildfire damage.
Challenges Ahead for the FAIR Plan
The FAIR Plan has seen rapid growth in recent years, raising concerns about its ability to cover claims if a catastrophic wildfire occurs. AB 234’s urgency statute would allow it to take effect immediately upon passage, underscoring how pressing this issue is.
Currently, the FAIR Plan’s nine-member governing committee is made up of insurance carrier representatives, along with four non-voting members representing agents, brokers, and the public (appointed by the governor).
As of 2023, the largest homeowners insurance providers in California were:
State Farm Group (19.92% market share)
Farmers Insurance Group (14.93%)
CSAA Insurance Group (6.52%)
Liberty Mutual Insurance Cos. (6.5%)
Mercury Casualty Group (6.11%)
What’s Next?
With the threat of wildfires on the rise, these legislative efforts could play a critical role in ensuring that Californians have access to reliable, affordable property insurance. Lawmakers and regulators are pushing for changes that not only address immediate risks but also help build a more stable future for the state’s insurance market.