California FAIR Plan Payouts So Far in Palisades and Eaton Fires

Earlier in February, the California FAIR Plan, the last resort fire insurance through the State of California, only had $377 million in the kitty available to payout claims, the Globe was told. After our visit to Pacific Palisades February 6th, the Globe heard that claims for the Palisades and Eaton fires were already being paid out. So somehow the FAIR Plan covered the gap to the $900 million goal to access the reinsurance.

Everyone has been nervous about this, knowing that the fire claims in Pacific Palisades and Los Angeles could wipe out the fund.

We sent the California Insurance Commissioner Ricardo Lara’s office a public records request on February 19, 2025, laying this out, and asking, “Where did FAIR get the additional $523 million? What is the funding source?”

In June, former state Senator Ted Gaines reported on the insurance crisis and the FAIR Plan for the Globe:

“California is and has been a lower-cost state for insurance but that did not accurately reflect the risk insurers faced, as the devastating wildfires of 2017 and 2020 proved,” Gaines said. “Those fires wiped out decades of insurer California profits and shed critical light on what rate adequacy really looks like. The low prices were an artifact of Prop. 103, which is acting as a price control, which always leads to shortages. It is proving a barrier to its stated goal of ensuring insurance is available to all Californians.”

Beyond Sen. Gaines’ explanation for how this happened, the real responsibility for California’s high insurance premiums lies in state politicians’ and the governor’s deluded “progressive” policy decisions and bad laws, driving up the high costs to rebuild. Most insurers say because of California’s high cost to rebuild, they can’t keep premiums artificially low any longer.

What are these high-cost-drivers?

• The California Environmental Quality Act (CEQA): As Ed Ring reported for the Globe, over 50+ years, “CEQA has acquired layers of legislative updates and precedent setting court rulings, warping it into a beast that denies clarity to developers and derails projects. When projects do make it through the CEQA gauntlet, the price of passage adds punitive costs in time and money.”
• Project labor agreements are one of the biggest obstacles to political collaboration between construction unions and groups representing business interests, Ed Ring explained. A PLA is “a pre-hire collective bargaining agreement with one or more labor organizations that establishes the terms and conditions of employment for a specific construction project.”
• federal, state, regional, and local agencies permitting, overlapping and conflicting regulations, and the agencies all have the power to halt building projects, allow a lawsuit, or rule change, require an entire new set of designs, and force and individual or builder to resubmit plans to every agency and start all over again (Ed Ring, summarized).

The Globe received a response Monday Feb. 24, 2025 from the California Department of Insurance, Legal Division-Government Law Bureau – we thanked them for their swift response. Here is what they sent and the information provided (emphasis the Globe):

“The Department concluded its search and found one responsive, public document linked as follows: Order No. 2025-1: Approving the California FAIR Plan Association’s Request to Issue. All other records are privileged and exempt from disclosure pursuant to Insurance Code sections 735.5, subdivision (c), 10097 and 12919, Government Code sections 7922.000, 7927.500, 7927.705, and 7929.000, and Evidence Code section 1040.”

I have abbreviated some of the information and embedded the document below.

WHEREAS, the FAIR Plan reported that it has estimated its total loss from the Palisades and Eaton fires at approximately $4 billion and anticipates paying 75%, or $2.34 billion, of the remaining $3.125 billion reserved for unpaid losses from the Palisades and Eaton fires during March, April, and May 2025, in addition to other claims which are outside the FAIR Plan’s reinsurance cover which, due to advances in technology, is much faster than its historic pay rate of 66%;

WHEREAS, as of the date of this Order, the FAIR Plan has reported that, if the requested assessment is not approved by the Commissioner, it will not have sufficient funds, by the end of March 2025, to continue paying claims related to the January 2025 Southern California wildfires, losses from unrelated or subsequent events, and other operating expenses, including reinsurance for 2025-26 and the cost of increasing staff to respond to the disaster; and,

WHEREAS, based on the foregoing information, the Commissioner is satisfied that the FAIR Plan has demonstrated that it is in substantial danger of insolvency unless it is authorized to assess its member insurance companies $1 billion to be collected in March 2025, and that the requested assessment is necessary to provide the FAIR Plan with sufficient funds to keep operating and promptly pay claims
without interruption.

It is ordered: 

1. The FAIR Plan’s request for an assessment in the amount of $1 billion is APPROVED;
2. The FAIR Plan must calculate each member insurer’s assessment participation in
accordance with the Plan of Operation (Ed. 8/27/24) and California Insurance Code sections 10094 and 10095;
3. This Order is final immediately upon execution;
4. Once served with an executed copy of this Order, the FAIR Plan may immediately begin issuing assessment participation notices to its member insurers, with member insurers to remit payment to the FAIR Plan within 30 days of the date that the FAIR Plan sends notice of the amount due; and,
5. The FAIR Plan maintains constant and immediate communication with Department staff to ensure the FAIR Plan remains solvent and continues to operate and promptly pay consumer claims without interruption.

IT IS SO ORDERED.
Executed this 11th day of February, 2025
By_____________________________
RICARDO LARA
California Insurance Commissioner

As for California’s high cost to rebuild fueling high insurance premiums and the high-cost-drivers? Remember, in 2021 Governor Newsom was found to have overstated the number of areas treated with fuel breaks and prescribed burns by 690%. Governor Newsom claimed that, due to an executive order of his, 35 of his priority projects had treated over 90,000 acres with wildfire prevention treatments. However, data from the state only showed 11,399 acres treated.