SACRAMENTO, California — California’s property insurer of last resort is getting dangerously bloated as regular insurers flee both disaster-prone and safer regions of the state, its president warned lawmakers in a hearing on Wednesday.
The FAIR Plan has an exposure of $366 billion across the state, having added $10 billion in January and $15 billion in February alone, said FAIR Plan president Victoria Roach. But it has just $200 million in surplus cash on hand to cover losses and limited access to reinsurance. That means that if a catastrophic wildfire tears through a community with a high concentration of FAIR Plan customers like Arrowhead or Truckee, the plan would levy heavy assessments on regular insurers who could pass along costs to other customers.
The FAIR Plan, which is an association of insurers required by the state to provide homeowner and commercial insurance to those with no other options, has been caught in a worsening spiral ever since record-breaking losses to wildfires in 2017 and 2018. Seven out of the top 12 property insurers, including State Farm and Allstate, have pulled back from California in some way over the past two years, blaming the cost of inflation and the increasing risk of climate-change-fueled wildfires.
Lawmakers on the Assembly’s Insurance Committee urged immediate action, with all of them saying they were receiving lots of calls, some daily, from constituents complaining about not being able to get insurance.
