Lara takes action to ensure FAIR Plan can continue paying consumer claims after the Southern California wildfires

Ordering the insurance companies' FAIR Plan to continue swiftly paying claims to Southern California wildfire survivors, Insurance Commissioner Ricardo Lara today took action to maintain its solid financial footing.

The FAIR Plan, an insurance safety net that the state requires insurance companies to operate, requested the commissioner's approval for $1 billion in additional funds from its member companies and also released detailed data about its claims paid to wildfire survivors.

Pursuant to statute, Lara approved the FAIR Plan's request — known as an "assessment" — for the funding necessary to continue meeting its obligations to Californians.

Commissioner Lara's action is consistent with his Sustainable Insurance Strategy and FAIR Plan modernization order, issued last summer, which established conditions to protect FAIR Plan policyholders and uphold the integrity of the state's insurance market.

Key actions include

* Directing the FAIR Plan to hire additional staff needed to process and pay claims fairly, fully, and quickly.

* Requiring the FAIR Plan to utilize all available funds, including reserves and reinsurance funds.

* Protecting consumers from bearing the full cost of an assessment, with insurance companies responsible for half the assessment under an agreement reached last year. Subject to the Commissioner's prior approval under Proposition 103, insurance companies may issue a temporary supplemental fee as a percentage of the policy premium and cannot pass assessment costs on to consumers in future rates.

* Maintaining a healthy FAIR Plan reserve fund for future claims as the summer wildfire season approaches.

* Requiring the FAIR Plan to comply with all laws applicable to other insurance companies, including advance payments for living expenses and personal property without the need for an inventory.

Lara finalized the Sustainable Insurance Strategy in 2024 — the largest insurance reform in 30 years — aimed at increasing the issuance of regular insurance policies in higher-risk areas and reducing reliance on the FAIR Plan.

Further underscoring the need for this reform, the most recent FAIR Plan assessments followed the 1993 Kinneloa Fire in Altadena and the Old Topanga Fire in Malibu and Topanga, which affected some of the same areas as the 2025 fires — claiming three lives and destroying nearly 550 structures in those devastating incidents.

Previous insurance commissioners approved $260 million, or approximately $563 million in today's dollars, in assessments for those fires and for the fires following the 1994 Northridge Earthquake.

Lara expects to file the Department's Report of Examination for an ongoing financial examination of the FAIR Plan, including its compliance with recommendations from the Department's 2022 Operational Assessment Report in coming months. The report called for significant changes in the FAIR Plan's governance, operations, underwriting and claims handling, risk management, customer service, and financial planning strategies and policies.

Lara issued the following statement

"I took this necessary consumer protection action with one goal in mind: the FAIR Plan must pay claims just like any other insurance company. I reject those who are hoping for the failure of our insurance market by spreading fear and doubt. Wildfire survivors can't cash 'what ifs' to pay for food and rent, but they can cash FAIR Plan checks.

"The fact that we are once again facing this issue 30 years after wildfires devastated these same communities highlights the need for change. Thirty years of stagnant regulations have placed more people at risk. We will move people away from the FAIR Plan, and insurance companies will write more policies under the Sustainable Insurance Strategy I finalized last year.

"We must rebuild stronger and be better prepared for future wildfires through common-sense mitigation. My Safer from Wildfires regulation provides a pathway for insurance discounts. We must take action to improve the financial standing of the FAIR Plan and prevent this situation from recurring. I strongly support legislation this session — just as I did last session — that would allow the FAIR Plan to access credit lines and catastrophe bonds to help pay claims in worst-case scenarios. I urge the legislature to act quickly and send it to the governor's desk."