The state’s insurer of last resort ran out of money to pay claims from the devastating Los Angeles wildfires.
Bay Area homeowners will likely be on the hook for helping bail out California’s insurer of last resort to the tune of $1 billion after it ran out of money to pay claims from the devastating Los Angeles wildfires.
State regulators announced this week they will allow the program, known as the FAIR Plan, to collect emergency payments from private insurers — who are expected to pass a significant portion of those costs on to policyholders statewide.
It was not immediately clear how much homeowners would have to pay, which homeowners would be charged, when they would see a new cost on their premiums or how long the increase would last.
The amount each insurance company must pay will be based on its market share in California. Under state law, insurers can only charge their customers up to half of the $1 billion assessment.
The FAIR Plan is a state-created pool of private insurers for homeowners who can’t find traditional coverage. In recent years, the number of policyholders on the plan has ballooned to more than 350,000 as insurers have ended homeowners’ coverage across the state amid worsening climate-driven wildfire seasons.
The insurance industry said any price hikes are necessary to ensure the FAIR Plan remains a viable option for homeowners in fire-prone parts of the state.
“For the FAIR Plan to recapitalize, they must be allowed to charge actuarily sound rates,” the American Property Casualty Insurance Association said in a statement.
Consumer groups, meanwhile, blasted regulators for greenlighting the bailout.
“The FAIR Plan is in trouble because insurance companies dumped too many homeowners,” said Carmen Balber, executive director of Consumer Watchdog, in a statement. “That’s why insurers are on the hook for FAIR Plan losses. Homeowners across California should not have to pay a penalty to repair the damage from home insurance companies’ predatory behavior.”
State Insurance Commissioner Ricardo Lara pushed back on those arguments, saying he rejects “those hoping for the failure of our insurance market by spreading fear and doubt.”
“I took this necessary consumer protection action with one goal in mind: the FAIR Plan must pay claims just like any other insurance company,” he said.
Bay Area homeowners will likely be on the hook for helping bail out California’s insurer of last resort to the tune of $1 billion after it ran out of money to pay claims from the devastating Los Angeles wildfires.
State regulators announced this week they will allow the program, known as the FAIR Plan, to collect emergency payments from private insurers — who are expected to pass a significant portion of those costs on to policyholders statewide.
It was not immediately clear how much homeowners would have to pay, which homeowners would be charged, when they would see a new cost on their premiums or how long the increase would last.
The amount each insurance company must pay will be based on its market share in California. Under state law, insurers can only charge their customers up to half of the $1 billion assessment.
According to the FAIR Plan, the state approved similar bailouts in 1993 after fires in Altadena and Malibu and again in 1994 and 1995 following the Northridge Earthquake. The total value of those assessments was $260 million, or $563 million adjusted for inflation, well below the current $1 billion requested by the FAIR Plan.
The FAIR Plan is a state-mandated high-risk pool of private insurers for homeowners who can’t find traditional coverage. In recent years, the number of policyholders on the plan has ballooned to more than 350,000 as insurers have ended homeowners’ coverage across the state amid worsening climate-driven wildfire seasons.
The insurance industry said any price hikes are necessary to ensure the FAIR Plan remains a viable option for homeowners in fire-prone parts of the state.
“For the FAIR Plan to recapitalize, they must be allowed to charge actuarily sound rates,” the American Property Casualty Insurance Association said in a statement.
“This is essential to prevent even greater strain on California’s already unbalanced insurance market and avoiding widespread policy cancellations that would jeopardize coverage for millions of Californians,” the industry group added.
Consumer groups, meanwhile, blasted regulators for greenlighting the assessment.
“The FAIR Plan is in trouble because insurance companies dumped too many homeowners,” said Carmen Balber, executive director of Consumer Watchdog, in a statement. “That’s why insurers are on the hook for FAIR Plan losses. Homeowners across California should not have to pay a penalty to repair the damage from home insurance companies’ predatory behavior.”
State Insurance Commissioner Ricardo Lara pushed back on those arguments, saying in a statement he rejects “those hoping for the failure of our insurance market by spreading fear and doubt.”
“I took this necessary consumer protection action with one goal in mind: the FAIR Plan must pay claims just like any other insurance company,” he said.
Discover more from World Byte News
Subscribe to get the latest posts sent to your email.
