California Department of Insurance (CDI) Commissioner Ricardo Lara has requested $1bn in additional funds from the commission’s member insurers to strengthen the FAIR Plan insurance programme.
The decision was made to ensure the FAIR Plan can continue covering consumer claims following the southern California wildfires.
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The FAIR Plan was established in 1968 as California’s insurance safety net.
Every property insurance company licensed in California automatically becomes a FAIR Plan member and may be called upon to help fund in response to catastrophes.
The programme provides insurance coverage for California residents and businesses in both urban and rural areas that are unable to secure coverage through traditional insurers.
The latest decision aligns with Ricardo Lara’s Sustainable Insurance Strategy and the FAIR Plan modernisation order issued last year, which set conditions to protect policyholders and maintain the stability of California’s insurance market.
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By GlobalDataThese actions include approving the FAIR Plan’s funding request, directing the hiring of additional staff to expedite claims payment, and requiring the use of reserves and reinsurance funds.
Additionally, insurance companies will cover half of the assessment cost, shielding consumers from future rates.
As of 9 February, the FAIR Plan received nearly 3,469 claims for damage from the Palisades fire and around 1,325 claims from the Eaton fire, reported Reuters.
To date, the programme is said to have paid out more than $914m to policyholders.
Commissioner Lara said: “I took this necessary consumer protection action with one goal in mind: the FAIR Plan must pay claims just like any other insurance company.
“I reject those who are hoping for the failure of our insurance market by spreading fear and doubt. Wildfire survivors can’t cash ‘what ifs’ to pay for food and rent but they can cash FAIR Plan checks.”
Last month, the CDI mandated a halt on all pending non-renewals and cancellations for residential properties in wildfire-affected areas. This applies to all active residential policies during the declared emergency.
