Senate committee advances bill to expand New Mexico FAIR plan limits, strips $50 million appropriation

Members of the Senate Finance Committee voted 7 to 4 to give a do-pass recommendation to Senate Bill 81 as amended after more than two hours of testimony from insurers, county officials and the Office of Superintendent of Insurance.

Senator Mimi Wirth, sponsor of Senate Bill 81, told the committee the bill would expand the state's FAIR plan'the insurer of last resort'by raising policy limits and altering board composition so homeowners and businesses that cannot obtain private coverage because of wildfire risk would have an option. "This bill increases the potential limits," Wirth said, adding that residential limits could rise from $350,000 to as much as $1 million and commercial limits from $1 million to as much as $5 million.

The bill also ties eligibility to mitigation measures and requires premiums set to be actuarially sound, the superintendent of insurance said. "We are going to be charging market premiums, not above market," the superintendent said, warning that FAIR plans use assessments on member insurers to cover catastrophic shortfalls rather than state general fund support.

Why it matters: Witnesses said wildfire exposure is forcing insurers to nonrenew policies or dramatically raise rates in parts of New Mexico, harming home sales, lending and local economies. Representative Harlan Vincent, who joined sponsors at the table, described constituents in Lincoln County who cannot obtain mortgages because they cannot buy insurance: "Without insurance, how do you buy property? ... You can't do it," he said.

What supporters said: County officials, fire chiefs and municipal advocates urged passage. Hannah Case Woods of New Mexico Counties said the plan "will provide an option for [constituents] when they don't have any other options." The state fire marshal and other witnesses said lack of insurance also reduces funding that flows to fire departments through insurance premium-related revenue.

What opponents said: Industry witnesses cautioned against the proposed board changes and warned about the plan's cost. Carol Walker, executive director of the Rocky Mountain Insurance Association and a participant in Colorado's recent FAIR plan overhaul, urged working with the existing New Mexico Fair Plan board rather than creating a new entity. Brent Moore, a lobbyist for the American Property Casualty Insurance Association and Allstate, said the bill would shift a program that has worked for decades and risk exposing the FAIR plan to insolvency without an appropriation.

Key details and numbers cited in testimony: the current FAIR plan limits are $350,000 for residences and $1 million for commercial properties; sponsors proposed raising the residential cap up to $1 million and commercial up to $5 million. The committee approved an amendment that removes a $50 million appropriation the sponsors had proposed as a backstop; sponsors said funding discussions will continue in the budget process (House Bill 2). Witnesses said the FAIR plan had about 7,000 policyholders and a balance of roughly $7 million after recent claims; the Ruidoso (South Fork and Salt) fires yielded roughly $5.5 million in claims and prompted about an $8 million industry assessment.

Actuarial and rate issues: Christian Myers, chief actuary at the Office of Superintendent of Insurance, testified that the largest carriers have sought 50'to'60 percent increases in homeowners rates in recent filings and that the FAIR plan had been priced about 20 percent below market. Myers said the office's review found the FAIR plan was "currently underpriced," and that the superintendent's office and the FAIR plan had contracted industry modelers (Guy Carpenter) to produce catastrophe modeling to inform premium-setting.

Committee action and next steps: The committee adopted an amendment that struck the $50 million appropriation from the bill and renumbered sections; sponsors said they expect budgeted funds to be considered in House Bill 2. After public testimony and sponsor responses the committee approved a motion for a do-pass recommendation on Senate Bill 81 as amended, 7 to 4.

Concerns highlighted during debate: committee members questioned the FAIR plan board's composition (historically industry-heavy), whether the plan would compete with the private market, how quickly surcharges or assessments could be collected after a catastrophe, whether banks would accept FAIR-plan coverage for mortgage lending, and how mitigation requirements would be enforced. The FAIR plan's executive director and board members were present and said the board would meet the day after the hearing to consider rate and limit changes.

What the bill does not do (as of the committee hearing): It does not create an immediate $50 million state backstop; the appropriation language was removed and any budget support would be considered in the capital/budget process. It does not automatically change mortgage acceptance rules; witnesses said banks do accept FAIR-plan coverage but that individual lenders can require different terms.

Ending note: Sponsors framed SB81 as a temporary, insurer-of-last-resort option until private market capacity returns and emphasized mitigation and catastrophic modeling as necessary supports for any expansion. Opponents urged more collaboration with the existing FAIR plan board and cautioned against unexpected costs or governance changes.