California State Government Urgently Requests $1 Billion from Insurance Industry for Southern California Wildfire Claims.

The California Insurance Department announced on the 11th that it urgently needs to collect 1 billion US dollars from private insurance companies to assist the “FAIR Program” in processing claims for the January wildfires in Los Angeles County. This wildfire insurance program, managed by the state government, serves as the last resort for high-risk California homeowners. It is also the first time in over thirty years that the program has been approved to seek additional funding.

California Insurance Commissioner Ricardo Lara stated that this funding will help the FAIR Program hire more personnel to process and pay wildfire claims fairly, fully, and promptly. According to the announcement, the program needs to utilize all available funds, including reserves and reinsurance funds.

Lara emphasized that the $1 billion funding boost will also help California prepare for future claims in the upcoming summer wildfire season.

Since January 7th, the Palisades Fire and Eaton Fire burned over 37,700 acres of land in the Pacific Palisades, Altadena, and Pasadena areas. Firefighters have successfully extinguished both fires.

According to a report from Cal Fire, a total of 29 people have died, and over 16,000 homes and commercial buildings have been destroyed. AccuWeather experts estimate that the economic losses from these fires could exceed $250 billion, potentially making it one of the most severe wildfire disasters in the United States.

California’s FAIR Program was established over fifty years ago as a mandatory fire insurance pool funded by multiple insurance companies, providing coverage for California residents and businesses unable to obtain insurance through private insurers.

In the heavily affected Pacific Palisades area, the FAIR Program’s exposure amount is approximately $5.9 billion, which is the total amount investors could potentially lose. This makes it the fifth-largest risk area for the FAIR Program.

Data from the FAIR Program shows that from September 2023 to September 2024, the number of policies increased by 60%, as many homeowners insurance companies continue to reduce their business in California.

However, according to former California Insurance Commissioner Dave Jones, new regulations may lead FAIR Program policyholders to bear additional costs following the Los Angeles County wildfires.

Jones stated in an interview with a media outlet in January, “Ultimately, FAIR Program will have enough funds to pay claims, but the way it ensures sufficient funds is through collecting fees from all California policyholders.” “If it does happen, that’s what will occur. People will receive additional bills… which will come as a big surprise to Californians.”

Lara also expressed strong support for legislation this year to allow the FAIR Program to obtain lines of credit and catastrophe bonds to help pay claims in the worst-case scenarios. ◇