Colorado is preparing to launch its first FAIR (Fair Access to Insurance Requirements) Plan in decades, aiming to provide a last-resort insurance option for property owners in high-risk areas.
The plan is set to begin operations early next year and is projected to cover approximately 1% of the state’s properties, or about 29,000, primarily in wildfire-prone mountain regions. Around half of the eligible residential properties are primary residences.
Kelly Campbell (pictured above), the executive director of the Colorado FAIR Plan, said that applicants will need to provide proof of rejection from three standard-market insurers to qualify. However, the total insured value of properties that might participate remains uncertain.
The FAIR Plan will fund its operations through premiums based on actuarially sound rates, supplemented by assessments on admitted property carriers. These assessments will be determined by market share.
The funds will cover expenses including underwriting, claims management, reinsurance, and capital needs, Campbell said in a report from AM Best. The association is currently working with a broker to design a reinsurance strategy and collaborating with actuarial firm Milliman on overall financial projections.
Campbell noted that launching the FAIR Plan resembles starting an insurtech company, though with more established resources and expertise. The plan’s nine-member board includes two consumer representatives, with the remaining seats filled by members from the insurance industry, including mutual and stock insurers, trade associations, independent agents, and a licensed producer.
“The board and the entire industry are critical to the success of this initiative,” Campbell said. She described the FAIR Plan as a market tool designed to improve property resilience, potentially making properties more attractive to private insurers over time.
The Colorado FAIR Plan will primarily cover fire but will offer endorsements for additional perils such as wind, hail, and vandalism. Policies will provide basic coverage, with limits of up to $750,000 for homeowners and $5 million for commercial properties. Coverage will be offered on an actual cash value basis, with options for limited endorsements to extend protections.
Campbell emphasized the need for scalability, noting the plan could start with as few as zero policies or as many as 1,000, depending on demand. The plan aims to remain flexible to address rapid changes, such as a surge in catastrophic events.
“We don’t just have our eye on the launch but on all the months after that,” Campbell said, adding that current catastrophe trends create new challenges for the insurance landscape.
Carole Walker, executive director of the Rocky Mountain Insurance Information Association and a founding board member of the Colorado FAIR Plan, said the state’s insurance market is under pressure.
“We are at the tipping point where insurers have reduced capacity but are still writing business,” Walker said. She noted that factors such as rising repair and rebuilding costs, which have outpaced inflation, are compounding market challenges.
Wildfire remains a primary concern in Colorado, where the state forest service estimates half of all dwellings are at high risk. However, Walker pointed to the December 2021 Marshall Fire, which destroyed more than 1,000 homes in an area not previously classified as high risk.
Additionally, Colorado experienced 400 hail events in 2023, ranking fourth in the nation after Texas, Nebraska, and Kansas, according to the National Oceanic and Atmospheric Administration.
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