California lawmakers are advancing legislation to enhance the California FAIR Plan's claims-paying capacity and expedite the insurance claims process for homeowners amid the Los Angeles wildfires.
The proposed FAIR Plan Stabilization Act would authorize the California Infrastructure and Economic Development Bank to issue catastrophe bonds to support the FAIR Plan during liquidity shortfalls, according to a report from AM Best.
“The loss in Southern California is inconceivable,” said Assemblymember Lisa Calderon, chair of the insurance committee and co-author of the legislation. “AB 226 will alleviate some of the uncertainty that FAIR Plan policyholders may encounter as a result of this tragedy.”
Assemblymember David Alvarez, who co-introduced the bill with Calderon, described the legislation as a good preliminary measure in broader efforts to stabilize the state’s insurance market and the FAIR Plan.
“When disaster strikes, Californians should be able to count on their insurance coverage to pay out valid claims,” Alvarez stated.
In addition to the FAIR Plan bill, lawmakers are drafting separate legislation to accelerate claims processing for homeowners, according to Speaker of the Assembly Robert Rivas. Details of this initiative were not disclosed.
Meanwhile, Insurance Commissioner Ricardo Lara outlined plans to establish a home-hardening grant program to reduce wildfire risks and improve long-term resilience. The California Safe Homes Act would provide financial assistance for low-income residents to install fire-resistant roofs and create defensible space around properties.
“We need to put money in people’s hands,” Lara said during a Jan. 10 briefing. “This measure is critical for protecting homes and improving long-term resilience against wildfire risks.”
Lara explained that the grant program would aim to cover some or all costs for eligible applicants, drawing inspiration from a similar initiative in Louisiana. He also proposed extending one-year moratoriums on non-renewals and cancellations for some commercial policyholders in addition to wildfire victims.
“Businesses are important insurance consumers and the financial backbone of many communities, and they also need this vital protection,” Lara said.
Lara implemented a mandatory one-year moratorium on non-renewals for specific ZIP codes in Los Angeles County on Jan. 10 and urged insurers to halt pending non-renewals or cancellations in wildfire-affected areas.
The Los Angeles wildfires, described by Rivas as one of California’s most devastating natural disasters, have destroyed more than 10,000 structures as of Jan. 10. Insured losses are projected to exceed $20 billion, according to J.P. Morgan.
UCLA Climate Scientist Daniel Swain characterized the fires as likely to become the most costly in the state’s history.
In 2023, the top five writers of homeowners multiperil insurance in California by market share were: State Farm Group, 19.92%; Farmers Insurance Group, 14.93%; CSAA Insurance Group, 6.52%; Liberty Mutual Insurance Companies, 6.5%; and Mercury Casualty Group, 6.11%, based on data from BestLink.
