California Insurers Can Pass Half of $1B FAIR Plan Rescue Cost to Policyholders | Insurify
Lara's approval limits how much of the assessment insurers can pass on to policyholders to half —
Wildfire claims burn through FAIR Plan funds
As of
Claims from the wildfires aren't just numerous — they're also expensive.
Approximately 45% of the claims are total losses, meaning the FAIR Plan must pay policyholders the maximum amount of their individual policy limit. Another 45% are partial losses, and 10% of those claims are "fair rental value" only, meaning payouts cover lost rental income.
And "it's important to note these approximations may shift as new claims are submitted and confirmed, including claims made before policyholders were able to return to their properties and determine the extent of the damage," the insurer said in a statement announcing its assessment request.
The not-for-profit insurer said it needs the
FAIR Plan administrators have estimated the plan's total losses from the Palisades and Eaton fires at around
Without the assessment, the plan would run out of funds by the end of March, leaving it unable to pay claims or meet operating expenses, according to Lara's order approving the assessment.
A new crisis for
The wildfires that swept across the
Total damage and economic losses from the wildfires could range between
On
"We know we will ultimately pay out significantly more, as these fires will collectively be the costliest in the history of the company," the company said in a letter to Lara. Wildfire costs will deplete the company's capital and could prompt rating agencies to lower the company's financial strength rating.
What's next: Impact on homeowners
On average,
Since 2020, multiple insurance companies have stopped writing new home insurance policies in
The
And while Lara's order approving the
But Consumer Watchdog, a consumer advocacy group based in
"The FAIR Plan is in trouble because insurance companies dumped too many homeowners,"
Balber said the organization is "exploring every legal option to stop a bailout if any insurance company seeks to make consumers pay."
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