Fair Plan growth in low-risk areas complicates depopulation; lawmakers hear clearinghouse and other legislative fixes

Growth of California Fair Plan policies into non-wildfire areas and several pending bills to adjust coverage and market mechanics were central topics at an Assembly Insurance Committee oversight hearing.

Victoria Roach, president of the California Fair Plan, told the committee the plan’s growth has accelerated since 2018 and that the organization is ‘‘closer to a take-all comers’’ approach than intended — in part because admitted carriers have reduced writing across some areas. ‘‘We are the insurer of last resort,’’ Roach said. ‘‘Today, that's not what's happening... people are coming to us first.’’

Nut graf: Committee members heard that depopulation — moving policyholders from the Fair Plan back to admitted carriers — depends on multiple factors: availability of admitted-market capacity, actuarially sound Fair Plan rates that do not undercut the admitted market, and operational tools such as the statutorily created Clearing House and proposed legislative changes.

Clearing House and market mechanics

Armand Feliciano described the Clearing House as a legislatively created platform intended to facilitate negotiations between private-market carriers and brokers to place Fair Plan policyholders into admitted coverage. Under current statute, the Clearing House is a platform but the Fair Plan cannot unilaterally move a policyholder; placement requires agreement between the private carrier and the policyholder’s broker.

Pending legislation and coverage expansion

Testimony summarized several bills under consideration or passed that affect the Fair Plan’s scope and customer profile: SB 11 expanded coverage for farms and wineries in 2021; the Department of Insurance increased certain dwelling and commercial limits in 2021–2025 (residential dwelling limits from $1.5 million to $3 million; commercial builders limits increasing toward $100 million per location). The Fair Plan also flagged AB 290 (extend grace periods for renewals), SB 525 (manufactured-home replacement-cost coverage), and AB 69 (depopulation mechanisms) as bills with potential impact.

Industry perspective

Speakers from industry trade groups told the committee they view Fair Plan growth as a market-health signal. Dan Dunmore of the California Building Industry Association said, ‘‘You should look at the Fair Plan as an indicator on the health of the regular market. The more it grows, the more unhealthy the regular market is.’’ John Norwood of the Independent Insurance Agents and Brokers of California said independent agents have fewer admitted-market placement options now, increasing placements into the Fair Plan.

Why depopulation is difficult

Roach and Feliciano outlined three barriers to depopulation the committee should address: (1) the admitted market must have capacity and willingness to write business again; (2) Fair Plan rates must be actuarially sound and generally not lower than admitted-market pricing in non-wildfire areas; and (3) operational depopulation tools (Clearing House and broker cooperation) must function smoothly. Feliciano noted cases where Fair Plan premiums in low-wildfire areas were materially cheaper than admitted-market alternatives, which reduces the incentive for policyholders to move.

Ending: Oversight and next steps

Members asked the Fair Plan for more granular data on nonrenewals, new policies, premium comparisons and county/ZIP-level concentrations. Fair Plan representatives agreed to follow up. Lawmakers and stakeholders urged a coordinated mix of rate filings, regulatory action under CDI’s Sustainable Insurance Strategy, and targeted legislation to restore admitted-market participation and enable depopulation.