The Colorado Division of Insurance has released draft regulations outlining how insurers participating in the state’s new Fair Plan can recover participation fees from policyholders.
The state established the Fair Plan in 2023 as an insurer of last resort and aims to launch the program in early 2025, executive director Kelly Campbell (pictured above) said. The plan is expected to cover approximately 1% of properties in the state.
Insurers are not required to recover participation fees, according to the draft regulations. However, those choosing to do so must apply a “fair and equitable” premium surcharge over a five-year period across all personal and commercial property policies.
This surcharge must be disclosed on a policy’s declarations page, according to a report from AM Best.
Once implemented, Colorado’s Fair Plan is expected to provide coverage for approximately 29,000 properties, primarily those in wildfire-prone mountain regions.
The surcharge must be calculated according to the Fair Plan’s plan of operation. Insurers must submit a rate filing for approval by the insurance commissioner at least 90 days before implementing the surcharge.
If the surcharge amounts to less than 1% of the premium, insurers may request a shortened recoupment period.
State lawmakers are also considering House Bill 25-1205, which clarifies that the Fair Plan is not an insurance company, a person engaged in the business of insurance, or a state agency. The bill states that the Fair Plan is responsible for its own debts and obligations.
The proposed legislation would also grant immunity to Fair Plan directors, employees, the insurance commissioner, and other department officials for actions taken on behalf of the plan. Legal action would be limited to breaches of contract or common law claims.
The insurance department is accepting public comments on the draft regulations until Feb. 14.
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