California home insurance exodus pushes state’s last-resort backup plan toward insolvency

“…The number of homes and commercial properties in high-risk wildfire areas covered by the California FAIR Plan has more than doubled, from 154,000 in 2019 to 375,000, and liability exposure has ballooned from $50 billion in 2018 to $336 billion in February, its president told lawmakers at an insurance committee hearing last week.

“These are huge numbers,” California FAIR Plan President Victoria Roach told the committee. “And they continue to grow. … As those numbers climb, our financial stability comes more into question.”

Roach added that one bad wildfire or even a series of smaller fires could overwhelm the plan’s resources, forcing it to bill all the state’s insurers for liabilities it cannot cover, which they in turn would pass on to all their insured home and business customers as higher premiums.

“It’s a gamble,” Roach said. “We are one event away from a large assessment, there’s no other way to say it, because we don’t have a lot of money on hand, and we have a lot of exposure out there.”

The FAIR Plan’s financial instability has emerged as collateral damage from the state’s insurance market meltdown. Major carriers have discontinued or restricted coverage in recent years following a series of costly wildfires — 14 of California’s 20 most destructive wildfires burned the state in the last 10 years. That’s forced property owners who’ve lost coverage onto the FAIR Plan in rapidly growing numbers — with 1,000 applications now every work day…”