The California FAIR Plan has reported a sharp rise in exposure and enrollment as more private insurers pull back from writing or renewing property coverage in the state.
According to a quarterly update, the FAIR Plan’s total exposure climbed 42% to $650 billion over the nine months ending in June.
The state’s insurer of last resort cited growing wildfire risks and rate inadequacy as key factors behind the shift.
“Increasing risks due to climate-driven wildfires and a lack of adequate insurance rates have resulted in fewer coverage options available to consumers in the voluntary market,” the FAIR Plan said, as quoted in a Best Wire report.
The number of policies in force reached 610,179, up 31% since the end of the FAIR Plan’s fiscal year last September. Written premium rose 33% over the same period to $1.84 billion. Of that total, $1.64 billion covered residential properties, while $201.2 million was written for commercial risks.
The spike in demand follows a series of large-scale wildfires and a broader withdrawal by insurers from high-risk regions. In January, the Palisades and Eaton fires burned through parts of Los Angeles County, including Pacific Palisades and Altadena. The FAIR Plan said it has paid out $2.7 billion across more than 5,000 related claims, resulting in an $800 million deficit.
Industry-wide insured losses from the Palisades Fire are estimated at $23 billion, while the Eaton Fire is expected to result in $17 billion in insured losses, according to Gallagher Re.
Meanwhile, the FAIR Plan is responding to a recent ruling from the Los Angeles Superior Court, which found the plan in violation of state insurance code due to insufficient coverage for smoke damage. The FAIR Plan is reviewing the decision but is not expected to appeal. It is currently updating its policy language to reflect how claims have been handled since last year, spokesperson Hilary McLean said.
As FAIR Plan enrollment grows, the broader homeowners’ insurance market in California continues to shift. The five largest writers of homeowners’ multiperil coverage in the state in 2024, based on direct premiums written, were State Farm Group (19.49%), Farmers Insurance Group (14.41%), Mercury Casualty Group (6.67%), Auto Club Enterprises Insurance Group (6.41%), and CSAA Insurance Group (6.36%), according to BestLink.
