American Property Casualty Insurance Association: CDI & California FAIR Plan Agreement Important First Step

CHICAGO, Illinois, March 31 (TNStalk) -- The American Property Casualty Insurance Association issued the following statement on March 30, 2023:

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SACTO - The agreement between Insurance Commissioner Lara and the California Fair Access to Insurance Requirements (FAIR) Plan is an important step but it is just the beginning of the journey, according to the America Property Casualty Insurance Association (APCIA). The following statement can be attributed to Mark Sektnan, APCIA vice president for state government relations.

"Consumers are looking for real solutions that will ensure a stable and functioning insurance market that can provide them with peace of mind in these turbulent times. California's insurers look forward to working with policymakers, and all other stakeholders to find these real solutions that will make the insurance market for companies regulated by the Department of Insurance (the admitted market) healthy and competitive again so that that consumers have more coverage choices.

"Right now, that means focusing on the solutions that will address the historic natural catastrophe losses and expand market capacity within the admitted market. Insurance is simply the cost of claims, and to keep rates affordable, we must focus on reducing the losses by reducing risk -- through individual parcel and community-wide mitigation.

"This new change is a necessary short-term solution. We need to continue finding long-term solutions. Forcing the FAIR Plan to expand beyond its capacity does not resolve the underlying issues that ultimately must be addressed. Forcing more coverage into the FAIR Plan will likely make conditions worse for consumers and the admitted market, as assessments to cover FAIR Plan losses will be the likely result.

"Admitted insurers are already struggling with inadequate rates to cover the increased risks caused by climate change and the growing number of communities in wildfire-prone areas of the state. Adding more liabilities onto the admitted market will disincentivize insurers from committing more capital where it is needed in these high-risk areas.

"To expand market capacity, insurers need greater stability and regulatory flexibility to navigate current market conditions and manage rapidly evolving risk, including potential solvency-related threats. The first step is making sure insurers can charge rates that reflect the risk of loss. Also, we need to allow admitted insurers to include the cost of reinsurance in their rates and use forward-looking probabilistic models to accurately assess future risk.

"California insurers operate under a 1988 outdated statute that does not allow them to adapt to 2023 climate-change created increased risks. We look forward to doing the hard work to enact real solutions so the Golden State can have a functioning and thriving insurance marketplace, providing consumers and businesses with the coverage they need."

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Original text here: https://www.apci.org/media/news-releases/release/75277/