Critical California insurer calls for $1 billion infusion to cover LA wildfire claims

USA Today

12-02-2025

Recovery efforts in Southern California are underway after deadly wildfires last month. But the state's last-resort property insurance provider needs a $1 billion infusion from private insurance companies to help pay millions in claims after the devastating blazes, officials said this week.
The California Department of Insurance said Tuesday they will allow the FAIR Plan, designed for Californians who can't get coverage on the private market, to collect $1 billion from private insurers doing business in California to help pay victims.
The request comes more than a month after the now-contained Eaton and Palisades wildfires killed at least 29 people, burned more than 37,000 acres and destroyed nearly 17,000 structures. As the blazes remain under investigation, they are the second and third most destructive wildfires in California history, according to Cal Fire.
The FAIR Plan has already paid more than $700 million to policyholders. About 5,000 claims have been made from those two fires alone, state officials reported last week.
"Wildfire survivors can't cash 'what ifs' to pay for food and rent, but they can cash FAIR Plan checks," California Insurance Commissioner Ricardo Lara said in a statement.
Still, experts have warned any wildfire-related assessments would likely drive up insurance costs for home and property owners across California, with insurers likely opting to either drop policies or decline new ones.
And the call for $1 billion in additional funds has critics in the state. Advocacy group Consumer Watchdog is contemplating filing a lawsuit alleging consumers in California may ultimately have to cover the additional funding for the FAIR Plan. Consumer Watchdog's Executive Director Carmen Balber described Lara's request as a "bailout."
"The FAIR Plan is in trouble because insurance companies dumped too many homeowners. That's why insurers are on the hook for FAIR Plan losses," Balber said in a statement, arguing private companies shouldn't meet payments for the plan by charging California residents more.
How does this California plan work? What's its role in the LA area wildfires?
The FAIR Plan, a not-for-profit catastrophe insurer, consists of a pool of companies required by law to provide insurance to property owners who can't find affordable, private rates. The FAIR Plan typically has higher premiums and limited coverage. It's user base has spiked in recent years, with FAIR now reporting more than 451,000 policies, about double the total in 2020, according to the insurer's website.
And, the value of properties insured by the FAIR Plan also totaled more than $458 billion as of September, up from $153 billion in 2020, FAIR's site said. Almost $6 billion worth of property is in Pacific Palisades, where the Palisades fire ripped through.
'What America should look like':Loss in the Altadena fires, and a hard road to recovery
While touring the massive damage from last month's wildfires, California Gov. Gavin Newsom told reporters, "My dad's house is under the FAIR Plan, the state's plan. Very expensive and it's not great coverage."
The latest ask also likely won't be the only funding request for the important plan, said Char Miller, an environmental analysis professor at Pomona College in Claremont, California.
"I think the additional $1 billion in funds is the first of many of such needs and it testifies to the extraordinary powers of these fires to consume land and budgets," Miller said. "The FAIR Plan estimates losses of $4 billion and I think that's too low as the costs will definitely continue to expand over the next two years or so."
Miller added while the $1 billion in proposed money focuses on property damage due to wildfires, the region will still have to contend with possible mudslides with rain expected later this week. Any damage could lead to victims facing additional losses and filing more insurance claims, Miller said.
The latest call is also the first time the Fair Plan has sought approval for additional funds in more than three decades, Lara said. The last time was after the Kinneloa Fire in Altadena and the Old Topanga Fire in Malibu and Topanga in 1993. The additional funds approved then are equivalent to $563 million today, the state said. The insurance commissioner added some of those same areas were also affected by this year's wildfires.
"The fact that we are once again facing this issue 30 years after wildfires devastated these same communities highlights the need for change," said Lara, who is again pushing state legislation for the FAIR Plan to access credit lines and catastrophe bonds to help pay claims in worst-case scenarios.
"Thirty years of stagnant regulations have placed more people at risk," Lara said. "I urge the Legislature to act quickly and send it to the Governor's desk."