Lawmakers call for expanding California FAIR insurance plan

(The Center Square) – California lawmakers called Wednesday for the state’s “insurer of last resort,” the California FAIR Plan, to evolve to insure more properties throughout the state.

The remarks come after years of the number of FAIR Plan policyholders climbing because of many private insurance companies declining to renew existing policies or pulling out of doing business in the Golden State altogether. This has pushed more and more homeowners in the state to turn to the California FAIR Plan.

“I’ve kind of reached a point where I prefer to call the FAIR Plan ‘the California safety net’ than the ‘insurer of last resort,’” said Assemblymember Lisa Calderon, D-City of Industry and the chair of the Assembly Insurance Committee, during the panel’s meeting Wednesday. “I feel like the FAIR Plan is no longer the insurer of last resort. When the voluntary insurance market abandons our constituents, the FAIR Plan is there to pick up those policies.”

There is a growing need to make sure the FAIR Plan works for California’s homeowners who can’t get home insurance policies anywhere else, Calderon said.

“Until the numbers stabilize, preferably decrease, it is our obligation that the FAIR Plan serves its purpose, and possibly expand their purpose,” Calderon added.

According to the Assembly Insurance Committee, the California FAIR Plan was originally created in 1968 to provide property insurance to California’s property owners in urban areas when they couldn’t get insurance from conventional insurance companies. However, after the 1994 Northridge earthquake caused a homeowners’ insurance crisis, the coverage area eligible for insurance through the California FAIR Plan expanded to include the whole state.

The Eaton and Pacific Palisades wildfires in January 2025 caused between $28 billion and $53.8 billion in property damage, according to a study published by the Los Angeles County Economic Development Corp. and the Southern California Leadership Council.

Homeowners whose homes were damaged or lost in those fires reported average losses of $668,000 on claims that are closed or settled, while those who have open claims reported average net losses of more than $1 million, according to a report released this month from the nonprofit Department of Angels.

Data from the California FAIR Plan shows that between September and December 2025, exposure has increased 4% to $724 billion – a 230% increase since December 2022. Much of that increased risk is from insuring homes in the state’s wildfire zones, accounting for roughly $670.5 billion of potential payouts for claims from policyholders, according to the data.

“We don’t manage our exposure,” Victoria Roach, president of the California FAIR Plan Association, testified during the insurance committee meeting. “Whereas other carriers can say they have a lot of exposure in one particular geographic area, so they don’t write [policies] more in that area, they write more [policies] over there instead, we don’t do that. We take people regardless of our exposure, which means we have areas in the state where we may have 50% or more in the market for those areas.”

Despite the increase in homeowners relying on the FAIR Plan to insure their homes, the FAIR Plan still doesn’t provide full homeowners insurance policies the way convention insurance companies do, Roach testified.

“If we go to provide a full policy, we’re looking at basically standing up another division of the company,” Roach said during the meeting. “We don’t have that infrastructure. We don’t have the vendors. We don’t have the staff. We don’t have claims people throughout the state to handle claims, so it’s a huge undertaking for us.”

A 30% to 50% increase in insurance rates for policyholders through the FAIR Plan would be necessary to be able to provide full property insurance policies, Roach added.

Some insurance industry officials spoke out against the FAIR Plan expanding, claiming that policyholders can get insurance for less than what they can get from standard insurance carriers.

“What we’re learning today is that the FAIR Plan is competing with the admitted market,” testified Terry McHale, a partner and legislative advocate for Aaron Read & Associates, a Sacramento-based lobbying firm. “That is wrong. It is exactly what we did not want to happen with the FAIR Plan, and that is absolutely something that must be addressed.”