California E&S Insurance

California Insurer of Last Resort Went Bust. It Won’t Be Alone. https://www.bloomberg.com/opinion/articles/2025-02-17/california-s-last-resort-insurer-fair-needs-a-bailout-expect-more California homeowners were just reminded that the financial backstop of last resort for houses destroyed by wildfires is … other California homeowners. It’s a sign of what’s in store for the rest of the country when too many homes lack adequate protection from the growing risk of natural disasters. Last week, surprising no one, California’s FAIR Plan said it didn’t have enough money to cover claims from the recent Los Angeles wildfires. The plan, which insures people who can’t obtain coverage from private insurers, has doubled in size in the past four years to cover more than 450,000 homes. It faces possible exposure of $4 billion for the Palisades Fire and $775 million for the Eaton Fire but had just $700 million in cash when the fires began and a $900 million deductible on its $2.6 billion reinsurance policy. Running out of money was never a question of if for FAIR, but how quickly and by how much. To fill the gap, California has imposed a $1 billion assessment on the state’s private insurers, all of which participate in FAIR by law. Half of that cost will pass immediately to customers, thanks to a new state rule, while the other half will just pass more slowly to customers. Many of those insurers are already dealing with heavy wildfire claims of their own. That will put even more upward pressure on premiums — State Farm has asked the state’s insurance regulator for a 22% emergency rate increase — and possibly encourage even more insurers to abandon California altogether.

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