California Fair Plan outlines $1 billion assessment, reinsurance limits and depopulation hurdles after January wildfires

California Fair Plan officials told the California State Assembly Insurance Committee on Oct. 29, 2025, that the plan’s membership and exposure have grown rapidly in recent years, that a board-approved $1 billion assessment of member insurers was requested after Jan. 7 wildfires, and that the plan is pursuing rate changes, new funding tools and market reforms to avoid future assessments.

The hearing, an oversight briefing by Victoria Roach, president of the California Fair Plan, and Armand Feliciano, a Fair Plan representative, focused on the plan’s role as the insurer of last resort, the mechanics of the January assessment, reinsurance limits, claims handling after the Palisades and Eaton fires, and legislative and regulatory steps—such as AB 226 and the Department of Insurance’s sustainable insurance strategy—intended to restore a functioning private homeowners market (the “admitted market”).

The Fair Plan’s role and why the hearing matters

The California Fair Plan was established by the Legislature in 1968 as a residual market to provide coverage only when consumers cannot obtain insurance through admitted carriers. "We are the crutch to get them through the crisis and back into the market," said Victoria Roach, president of the California Fair Plan. Roach and Feliciano told committee members that the plan has increasingly become a first stop for consumers rather than a temporary safety net, driven by a shrinking voluntary market and by examples where Fair Plan pricing is lower than private-market alternatives in some non‑wildfire areas.

The Fair Plan reported nearly 575,000 policies and about $599 billion in exposure as of March 31, 2025. Officials said policy counts and exposure have grown sharply since 2018, with a 40% year‑over‑year increase in policies and a 60% increase in exposure reported for 2024; similar growth was tracking in the current fiscal year. That growth, Roach said, is “exponential” and concentrates risk across the state, including in areas not normally classified as high wildfire hazard.

Assessment and reinsurance: what the Fair Plan did and why

After the Jan. 7 wildfires, the Fair Plan’s accounting committee and board concluded the plan would lack funds to pay projected claims and recommended an assessment of member companies. "The accounting committee... recommended that we assess a billion dollars," Armand Feliciano said. The board unanimously agreed and the Fair Plan submitted the request to the California Department of Insurance (CDI), which approved the assessment process and the billing to member companies.

Officials explained how assessments are calculated: the Fair Plan groups affected policies by fiscal/pool year and assesses member companies according to market share for the relevant pool year; companies then have 30 days to remit the assessed share. Feliciano said more than 80% of the assessed money was remitted within the first 10 days. He emphasized that assessments are a statutory mechanism built into the plan’s structure.

Reinsurance is the Fair Plan’s other primary backstop. The plan described a reinsurance tower with an initial layer of $1.25 billion that the Fair Plan must absorb before reinsurance attaches. Feliciano warned that multiple separate events can exhaust the Fair Plan’s resources without breaching a single-event reinsurance layer, because reinsurance responds per declared event. That structure, plus the Fair Plan’s growing exposure, is why officials said the plan needs higher actuarially sound rates and additional financing options such as a line of credit or bond authority to avoid frequent reliance on assessments.

Claims handling and payments after the Jan. wildfires

The Fair Plan reported about 5,500 claims from the January fires, with close to half reported as total losses. Officials said they have paid more than $2.9 billion so far and estimated total ultimate payments near $4.0 billion. The plan said it has closed more than half the claims and about 2,400 remain open. For total-loss claims the Fair Plan said it advanced 50% of Coverage A at first loss notice and paid full policy limits when replacement-cost estimates validated the amounts; personal-property advances were also made (for many claims the personal-property amounts were paid quickly, up to specified thresholds).

On smoke and ash claims, Roach explained the Fair Plan’s policy is to pay when there is direct physical loss: "Our policy... covers smoke and fire when there's direct physical loss. The smoke or ash in a house is not necessarily covered if it hasn't damaged anything." She described an adjuster process: an independent adjuster inspects, photographs and reports; if items or structures show physical alteration (for example, irreparably damaged furnishings or structural staining), the Fair Plan pays for repair or replacement and may deodorize or otherwise remediate when appropriate. The plan acknowledged disputes arise and said denied claim notices inform consumers of the right to file a complaint with the Department of Insurance.

Depopulation, clearinghouse and market fixes

Roach and Feliciano described depopulation—the movement of Fair Plan policyholders back into the admitted market—as the central long‑term goal. They said the Fair Plan lacks a unilateral mechanism to move people out; depopulation requires a functioning private market, brokers willing to place business with admitted carriers, and pricing that makes the private market competitive with Fair Plan rates. Feliciano described the Clearing House mandated by recent legislation as a platform to facilitate offers from private-market carriers to place Fair Plan policyholders, but stressed the Clearing House does not force a transfer without broker and policyholder agreement.

Several bills were mentioned as relevant to the plan’s finances or coverage scope: AB 226 (authorizing financing mechanisms including lines of credit and potential bond access for the Fair Plan), AB 290 (extension of grace periods for renewals), SB 525 (replacement-cost coverage for manufactured and mobile homes, which supporters estimate could affect ~500,000 policyholders), and AB 69 (a depopulation bill). The Fair Plan said it supports AB 226 to expand short‑term liquidity options, and it noted the potential impact of SB 525 if replacement-cost coverage for mobile homes were required.

Questions from committee members and public comments

Assembly members pressed officials on the unusual growth in low‑wildfire‑hazard areas, the mix of customers who remain with the Fair Plan, historical rate changes and the adequacy of the plan’s governance and transparency. Roach said average Fair Plan dwelling premiums rose from roughly $1,839 in 2021 to about $2,800 in 2025 while average policy limits rose from about $684,000 to over $1 million. She said the Fair Plan had not paid prior surpluses back to member companies in the months before the fires, reasoning that retained surplus would support claims payment capacity.

Public commenters including Dan Dunmore of the Building Industry Association and John Norwood of the Independent Insurance Agents and Brokers of California urged legislative action to re‑engage the admitted market and described current growth of the Fair Plan as an indicator of an unhealthy voluntary market.

What the Fair Plan asked the Legislature to consider

Fair Plan officials asked the Legislature and CDI to support: moves to get rates to actuarial soundness, mechanisms to provide liquidity (AB 226), continued development and use of the Clearing House and the CDI’s sustainable insurance strategy to reopen the admitted market, and regulatory or programmatic approaches used in other states to limit residual‑market eligibility where an admitted alternative exists. Roach said the Fair Plan is not taxpayer funded and urged policy and regulatory fixes designed to return policyholders to the private market.

Ending note

Officials committed to follow up with committee members on specific data requests, including more granular counts of new, renewed and nonrenewed policies and denial/appeal statistics. "I'm happy to follow‑up," Armand Feliciano said when asked to provide additional figures. The hearing record shows the Fair Plan now faces near‑term financial pressure from concentrated exposure and potential future wildfires, and the agency and stakeholders identified a combination of rate, regulatory and financing changes they say will be necessary to reduce the chance of future member assessments.