California’s FAIR Plan gets $1 billion bailout as wildfire claims in the US state surge

CALIFORNIA WILDFIRES

California’s FAIR Plan, the state’s last-resort home insurance program, is out of money after a wave of claims from the recent Los Angeles wildfires. State regulators announced on Tuesday that the plan will receive a $1 billion bailout to continue paying homeowners who lost their properties, The Washington Post reported.

FAIR Plan struggles to cover wildfire losses 
The massive wildfires that swept through Pacific Palisades and Altadena last month destroyed nearly 16,000 buildings. Thousands of homeowners, unable to get private insurance, turned to the FAIR Plan, which has already paid out $914 million in claims. However, costs are expected to rise, leaving the plan unable to meet its obligations without additional funding.

To stay afloat, the FAIR Plan asked California Insurance Commissioner Ricardo Lara to approve a $1 billion assessment on insurance companies operating in the state. These companies can pass some of the costs onto their policyholders, potentially making home insurance more expensive across California.

Rising insurance costs and shrinking options
Wildfires in California have become more destructive in recent years, making home insurance harder to obtain. Private insurers like State Farm have been pulling out of high-risk areas. In 2024, State Farm did not renew nearly 70% of its policies in Pacific Palisades, forcing more homeowners to rely on the FAIR Plan.

Lara defended the bailout, saying it was necessary to ensure homeowners receive payments for their losses. “Wildfire survivors can’t cash ‘what ifs’ to pay for food and rent, but they can cash FAIR Plan checks,” he said. He also expressed hope that new state policies would stabilize the insurance market and reduce reliance on the FAIR Plan.

Largest bailout in FAIR Plan history 
The FAIR Plan was created in 1968 as an insurance safety net for homeowners who couldn’t get coverage in the private market. The $1 billion bailout is the largest in its history. The last time the plan needed a financial boost was in 1994 after the Northridge earthquake, when it received a $260 million bailout (equivalent to about $563 million today).

As of February 9, more than 4,700 claims have been filed from the Palisades and Altadena fires, with nearly half classified as total losses.

With insurance companies retreating from fire-prone areas, California faces a growing crisis. The bailout offers temporary relief, but experts warn that without long-term solutions, the state’s home insurance market will remain unstable.