A new Colorado program to extend property insurance to residents with no other choices has sold only a few dozen policies in its first months, a stark contrast to similar programs in other states that are swelling to precarious levels.
The state-created Colorado FAIR Plan began selling insurance in April to people unable to buy coverage from a private insurer and was projected to have 20,000 within three years.
As of last week the plan had sold 55 policies, plan Executive Director Kelly Campbell said.
“Right now, we’d not be on track” for 20,000 policies, Campbell said.
The minimal interest in the Colorado FAIR Plan is raising questions about whether state lawmakers needed to create a property insurer of last resort — or whether they designed a successful program that would avoid the explosive growth of programs in other states.
“If there isn’t any need or demand for the FAIR plan [now], that’s fantastic for consumers,” Kelly said, noting that property owners are still able to buy coverage from private insurers.
Mark Friedlander, a spokesperson for the industry-funded Insurance Information Institute, said the minimal interest indicates that Colorado’s FAIR plan wasn’t needed.
“There’s plenty of options in the private market. Where’s the crisis?” Friedlander said. “Why did Colorado lawmakers need to push this through when there’s no crisis?”
Colorado’s FAIR plan has been closely watched, in part, because similar programs in other large states are taking on larger-than-expected roles as natural disasters, inflation and other factors weaken insurance markets.
The California FAIR Plan has seen explosive growth — jumping to 610,000 policies from 330,000 nearly two years ago — as insurers have stopped covering wildfire-prone areas.
The growing Texas program that insures coastal properties against wind damage decided last week to cut its reserves for paying claims by $2.5 billion in 2026 to avoid increasing rates.
The growing financial exposure threatens insurers across each state — and potentially their policyholders — because the state-chartered programs can impose assessments if they run out of money.
Major wildfires led to plan’s creation
The Colorado Legislature and Gov. Jared Polis (D) created the plan in 2023 after a series of wildfires in 2020 caused extensive damage and sent insurance rates soaring. It’s the first insurer of last resort created by a state since Hawaii’s in 1991 and represents the first effort to design one for a climate-changed world.
Colorado officials designed the program to be small, minimally used and unlikely to have to rely on imposing assessments on insurance companies statewide. The state insurance commissioner must approve assessments, a policy not found in other states.
“It seems to me they’re trying to take lessons from some of these other state FAIR plans that have had either financial struggles or potential for financial struggles,” said Marc Ragin, a professor who studies insurance and climate risk at the University of Georgia. “I think that it’s small by design.”
Ragin said if you think of the plan as an “emergency backup” — closer to FAIR plans’ traditional role — then 55 policyholders is not a troubling figure.
The American Property and Casualty Insurance Association, an industry lobby group, initially opposed Colorado’s FAIR program but became supportive after changes made it more financially independent and less likely to impose assessments, Karen Collins, the organization’s vice president of property and environment, said in an email.
Campbell, a former insurance-industry lobbyist who became head of the FAIR plan last year, said the program did a market assessment in August 2024. Polling and studies of other state FAIR plans led to an “educated guess” that covering 1 percent of Colorado’s property-insurance market within three years — roughly 20,000 policies — was the right target.
Campbell said she’s “a little surprised” that the program has only sold 55 policies and cited three main reasons.
The program’s basic insurance policies cover fire and lightning damage, with supplemental coverage available for wind, hail and vandalism. But after a disaster, its payouts are less generous than those from private insurers.
If a fire damages a $500 stove, Campbell said, most insurers will pay the full replacement cost. Colorado’s FAIR plan accounts for depreciation and pays policyholders based on the age of the equipment, which might be $250 for a $500 stove that’s halfway into its 10-year lifespan.
FAIR plan policies also don’t cover other things people often want with their home insurance such as water damage, theft and liability, Campbell said.
She suspected that many Colorado consumers also are opting for “more robust” policies sold by insurance companies called nonadmitted carriers. The companies are allowed to do business in Colorado and other states but are less regulated by the state.
There’s evidence that so-called excess and surplus carriers are doing more business as extreme weather makes it harder to get insurance from ordinary carriers.
Last year, the Insurance Information Institute said it’s observed “significant growth” in the market segment nationally and especially in Florida, California and Louisiana.
‘It is not necessary right now, but…’
Charles Nyce, a professor of risk management and insurance at Florida State University, said it’s “believable” the excess and surplus segment is contributing to the Colorado FAIR Plan’s low sales.
The third reason Campbell cited is that Colorado FAIR is new and unfamiliar to property owners and insurance agents.
As for the FAIR plan itself, Nyce said insurers and policymakers in Colorado are doing their best in a tight spot.
“I do agree with the industry that it is not necessary right now, but I do think it is good planning by Colorado in case it becomes an issue,” Nyce said.
“They did not have a good mechanism to respond to a market crisis. While I don’t think FAIR plans are optimal for addressing cat risk type availability problems, it does provide Colorado a tool in their toolbox.”
Colorado state Sen. Judy Amabile (D), who co-sponsored the 2023 bill that created the FAIR plan, said her constituents in Boulder County in the Rocky Mountain foothills have complained about insurers pulling out of their areas. With extreme weather worsening, Amabile said, it made sense to set up an insurer of last resort in Colorado.
From 2010 to 2023, Colorado sustained 48 disasters that each caused at least a billion dollars in damage, according to the Rocky Mountain Insurance Information Association, which represents property and casualty insurers in Colorado, New Mexico, Utah and Wyoming.
The average homeowners’ premium in Colorado surged 58 percent in the five years from 2018 to 2023.
“It was incredibly prudent of us to get this set up before we had an emergency situation on our hands,” Amabile said. “What should we do? Should we wait until we are in a crisis?”
