On March 13, Adam Weg and Caitlin Oswald authored “The Make It FAIR Act: A sustainable solution or compounding problems?" in the Daily Journal. The following is an excerpt:
California lawmakers recently introduced Assembly Bill 1680, known as the “Make It FAIR Act” (the “Act”), aimed at reforming the California FAIR Plan Association—what we all typically refer to as the state’s property insurer of “last resort.” The Act proposes, among other things, offering more comprehensive homeowners’ coverage, like what is typically offered under a traditional homeowners insurance policy.
In recent years, wildfire losses across California have led many private insurers to withdraw homeowners’ coverage in many areas throughout the state (including some of the most densely populated areas, like Los Angeles). At the same time, the private insurers that still offer coverage (like surplus lines carriers) tend to offer it only in exchange for exorbitant premiums that are prohibitive for most homeowners. As a result, California homeowners in low-risk and high-risk zones have no option but the FAIR Plan—despite it costing two to three times more than the premiums for traditional homeowners insurance in the past and the fact that it offers far more limited coverage (i.e., fire). Although the Act represents a step toward expanding consumer protections, significant economic challenges accompanying the implementation of these reforms remain.
Financial strain and solvency concerns
Expanding coverage comes at a cost. Many insureds under the FAIR Plan are already struggling to pay higher premiums, which continue to increase as private insurers flee the market in California. It remains unclear how the Act will provide broader, more comprehensive coverage, and what additional financial burdens it might impose on insureds.
As enrollment in the FAIR Plan surges, concerns regarding its solvency have also intensified. The Eaton and Pacific Palisades fires in January 2025 depleted (or likely will deplete) the FAIR Plan’s reserves. In early 2025, the FAIR Plan reported an estimated $4 billion in losses from the fires. This prompted the FAIR Plan to impose a $1 billion assessment on its member insurers, half of which was passed on to their insureds.
For the full article, click here.