California’s High-Risk Insurer Gets $1 Billion Bailout After L.A. Fires | The move will likely lead to higher costs for households across the state, and may push more insurers to leave, intensifying a home insurance crisis

> California’s home insurance plan of last resort, designed for people who can’t get coverage on the private market, does not have enough money to pay claims from the Los Angeles wildfires and is getting an infusion of cash from regular insurers.

> State regulators said Tuesday that they will allow the program, known as the FAIR Plan, to collect $1 billion from private insurance companies doing business in California to pay its claims. That is likely to drive up insurance costs for homeowners across the state.

> The situation marks a perilous new stage for California’s home insurance market, which had already been reeling from wildfires made more frequent and intense by climate change. Facing growing losses, major insurers like State Farm were already pulling back from the state, making it harder for homeowners to find coverage.
Now the pressure to leave will be even greater.

> The $1 billion assessment is the largest since the FAIR Plan was created in 1968, and the first time since the 1994 Northridge earthquake near Los Angeles that the FAIR Plan has faced claims it can’t pay on its own. The fee will be divided among insurers based on their market share, as required by state law.

> The problems facing insurers in California did not start with last month’s wildfires in Los Angeles. Fires in 2017 and 2018 wiped out a quarter-century of profits for insurers, leading many carriers to reduce the number of homeowners they covered. Making the problem worse was the fact that California regulators have historically made it difficult for insurers to raise their premiums.

> Still, the Los Angeles fires made insurers’ financial position even more tenuous. Last week State Farm asked state regulators for an urgent 22 percent rate increase, which it said was necessary “to help avert a dire situation for our customers and the insurance market in the state of California.” Mr. Lara’s office said he is still reviewing the request.

> As wildfires get worse, a vicious cycle is emerging: More insurers leave, pushing more homeowners toward the FAIR Plan, which is less able to cover claims after the next disaster, leading to more assessments on regular insurers, pushing them out of the state even faster.

> change can’t come from the insurance sector alone, Mr. Lara said. Officials need to tighten the rules around how and where people construct homes and infrastructure, he said, so that communities suffer less damage from future fires.

> [“The responsibility now is on local governments to build better,” Mr. Lara said.](https://reason.com/2025/01/10/los-angeles-zoning-laws-pushed-people-and-homes-toward-fire-prone-areas/)

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