California’s backup insurance provider seeks $1B after wildfires. Policyholders could pay half

The California FAIR Plan on Tuesday was allowed to seek $1 billion from insurance companies that do business in the state in response to the Los Angeles wildfires — half of which could ultimately be covered by policyholders.

The move was approved by Insurance Commissioner Ricardo Lara.

“Wildfire survivors can’t cash ‘what ifs’ to pay for food and rent,” he said in a statement, “but they can cash FAIR Plan checks.”

The plan is a state-created private insurer of last resort that people turn to when they can’t find fire coverage for their homes or other properties. It is made up of all the companies that are licensed to write property policies in California and is not funded by taxpayer dollars.

In recent years, the number of people with FAIR Plan coverage has grown rapidly as major companies have limited and shed business in the state following years of major wildfires and growing fears about more destructive natural disasters in the future.

There were already concerns about the plan’s financial health well before the major fires erupted earlier this year. On Tuesday, the plan said it had received more than 4,700 claims related to the Palisades and Eaton fires and had paid more than $900 million. Overall, it could face $4 billion in losses for those and another fire in Los Angeles County and has about $1.2 billion in cash available, the plan’s president Victoria Roach said in a letter to Lara.

The plan has already tapped into its own insurance to help cover costs related to the fires, Roach said. Without the $1 billion boost, though, she said the plan “anticipates it could be unable to pay claims and operating expenses next month.”

The last time the plan was allowed to seek money from private companies came after another set of Southern California fires that occurred more than 30 years ago, including those that followed the 1994 Northridge earthquake.

Carmen Balber, the executive director of Consumer Watchdog, an advocacy group, criticized the move in a statement saying the plan “is in trouble because insurance companies dumped too many homeowners.”

Once insurance companies are billed by the plan, they have 30 days to pay. They are able to charge temporary fees, if Lara approves, to cover up to 50% of the amounts they owe.

Balber said Consumer Watchdog was considering taking legal action “to stop a bailout if any insurance company seeks to make consumers pay.”

In a press release announcing the approval, Lara also called on lawmakers to quickly pass a bill that would allow the plan to use loans, bonds or lines of credit to cover claims.

Companies would still be asked to help pay them back, but they would have more time to do so.

Both the FAIR Plan and Balber have said they support the measure.

The bill has not yet been heard in a legislative committee.

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