A new bill in California aims to strengthen the financial capacity of the California FAIR Plan, which provides insurance coverage for high-risk properties. The bill, known as Assembly Bill 226, recently passed the Assembly with unanimous support, receiving a vote of 72-0.
Authored by Assemblymembers Lisa Calderon from Whittier and David Alvarez from San Diego, this legislation will allow the FAIR Plan to seek additional funding through options like issuing bonds or obtaining a line of credit. Supporters of the bill believe these financial tools will help the FAIR Plan avoid future assessments on member insurance companies, which could burden them with high costs.
The need for this bill became clear after the severe wildfires in Los Angeles, which prompted the FAIR Plan to request a staggering $1 billion assessment from member insurers. California Insurance Commissioner Ricardo Lara approved this assessment earlier this year to cover claims related to the wildfires, which have resulted in over $12 billion in payouts.
The FAIR Plan has already paid out more than $914 million to policyholders affected by recent fires, including the Palisades and Eaton fires. As the bill moves forward, it has gained additional support, with 15 co-authors joining the effort and backing from Commissioner Lara and consumer advocates.
Now that it has cleared the Assembly, AB 226 is headed to the Senate for further consideration. If passed, this bill could significantly enhance the FAIR Plan’s ability to handle claims and provide stability for California’s insurance market in the face of natural disasters.