The recent wildfires in Los Angeles have caused staggering losses, with up to $30 billion worth of damage. Consumer groups are warning that these losses could lead to increased rates for homeowners throughout California, even if they are not part of the California FAIR plan. The FAIR plan, which was established in 1968 as an insurer of last resort for high fire risk areas, may not have enough funds to cover the extent of the damages from the wildfires. As a result, state insurance regulators may require private insurers to make up the balance, potentially costing policy holders between $1,000 to $3,700.
The increase in losses and the strain on the FAIR plan is not a new issue, as private insurers have been canceling policies for high-risk areas in recent years. With commercial insurers retreating, more policies are being spread across the high-risk pool, leaving resources thin in the event of a catastrophe.
To address the financial strain caused by the wildfires, Assemblymember David Alvarez has introduced a bill to authorize the California Infrastructure and Economic Development Bank Fund to issue bonds and loan funds to the FAIR Plan. This financing option for catastrophic claims could help stabilize the market and prevent policy holders from facing significant rate increases.
In the midst of a special legislative session, California lawmakers are considering various options to expedite insurance claims, fast-track rebuilds, provide fire aid to undocumented immigrants, and boost penalties for arson. Lawmakers from San Diego are specifically looking at ways to rebuild quickly, prevent future fires, and ensure that insurance companies do not drop policies.
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Photo credit voiceofsandiego.org