In response to the devastating wildfires that swept through Los Angeles County earlier this year, California lawmakers are advancing a bill aimed at strengthening the state's insurance market. Assembly Bill 226 seeks to provide the California FAIR Plan, which serves as the last-resort insurance provider for many homeowners, with the ability to request state-issued bonds to ensure claims can be paid following a major disaster.
Legislators and industry representatives have expressed concerns that another large-scale catastrophe could push the already fragile insurance market toward collapse. Dan Dunmoyer, president of the California Building Industry Association, emphasized the importance of this legislation during a hearing on Wednesday, stating, "It is very important for this market to stabilize. God forbid we have another fire."
The FAIR Plan was designed to offer coverage to homeowners who are unable to obtain policies through standard insurance providers. Assemblymember David Alvarez, a Democrat from San Diego and a co-author of AB 226, explained that the bill would allow the FAIR Plan to seek financial assistance from the California Infrastructure and Economic Development Bank. If the plan were to run out of funds following a major disaster, the bank could issue bonds to cover claim payments.
By spreading financial obligations over time, the measure would help insurance companies manage costs and prevent sudden and excessive rate hikes for policyholders. Alvarez described the bill as a straightforward solution, saying, "This bill is quite simple."
The proposal faced no organized opposition and passed unanimously in the Assembly Insurance Committee. Assemblymember Lisa Calderon, a Democrat from Whittier who chairs the committee, is a co-author of the legislation. The bill now moves to the Assembly Appropriations Committee for further consideration.
California’s insurance market has been significantly impacted by increasing wildfire risks, leading to a surge in FAIR Plan enrollments. Assemblymember Dawn Addis of Morro Bay noted that participation in the plan has increased by as much as 500 percent in some counties. She warned that if the plan became financially unstable, it would have severe consequences, saying, "It is absolutely untenable if this plan is insoluble."
As an urgency measure, AB 226 would take effect immediately if it passes both legislative chambers with a two-thirds vote and receives the governor’s approval.
Alongside AB 226, lawmakers are advancing several other bills to address the state's ongoing insurance challenges.
Assembly Bill 238, introduced by Assemblymembers John Harabedian and Jacqui Irwin, would allow homeowners facing financial difficulties to request mortgage forbearance. Borrowers would only need to declare a hardship to pause foreclosure proceedings.
Assembly Bill 69, authored by Lisa Calderon, would require insurance brokers to evaluate whether FAIR Plan policies could be transferred to a standard insurance market before renewal.
Assembly Bill 488, introduced by Republican Assemblymember David Tangipa of Clovis, proposes changes to the FAIR Plan’s rate application process by eliminating certain procedural requirements, including a mandate for the plan to publish its toll-free phone number in directories.
With California’s property insurance market becoming increasingly unstable, lawmakers are moving quickly to implement solutions before another disaster puts further pressure on homeowners and insurers alike.
