Overview
- The state-backed FAIR Plan now covers roughly 696,000 properties with about $788 billion in potential losses while offering only basic fire-only policies that exclude theft, liability, and water damage.
- Major carriers began shedding California home policies after repeated wildfires and rising reinsurance costs, pushing many homeowners into the FAIR Plan or into surplus-lines insurers that charge large deductibles.
- Surplus-lines, which operate outside many state rules, have expanded from about 1 percent of the market to roughly 7 percent since 2021, leaving some buyers with five-figure deductibles and weaker consumer protections.
- Regulatory choices increased the FAIR Plan's exposure by raising home policy limits and forcing it to insure large condominium developments, then limited its wildfire payouts to $500 million, shifting potential losses to policyholders, member insurers, or taxpayers.
- The plan's rapid growth into ZIP codes classified as low-risk has produced cross-subsidies and industry warnings that the scale and uneven risk distribution raise the real possibility of insolvency or a costly rescue, a dynamic that traces back to the plan's creation in 1968 as an insurer of last resort.