California's Fire Insurer Just Needed Its Own Bailout

For 32 years, California's insurer of last resort didn't need rescuing. Then, within the space of a single year, it needed two.

The FAIR Plan — short for Fair Access to Insurance Requirements — is the pool of insurers required by state law to cover homeowners nobody else will touch. It was built as a narrow safety net, not a mainstream option. But after the Palisades and Eaton fires tore through Los Angeles County in January 2025, the plan was hit with an estimated $4 billion in losses. By Feb. 9, it had already paid out more than $900 million in claims, and its own president, Victoria Roach, had warned state regulators the plan was one event away from a large assessment. The event had already happened.

The first assessment since 1993

On Feb. 11, 2025, California's insurance department approved a $1 billion assessment on insurance companies doing business in the state — the first time regulators had done this since 1993, after the Kinneloa and Old Topanga fires burned some of the same Altadena and Malibu neighborhoods that burned again this year. Under rules that had only just taken effect, half of that $1 billion could be passed straight through to policyholders as a surcharge, marking the first time in the FAIR Plan's history that ordinary customers, not just insurance companies, would be billed directly for another region's fire losses. By late October 2025, insurers had already collected more than $150 million of that surcharge, an average of roughly $50 tacked onto a standard homeowner's bill, according to the Los Angeles Times.

Insurance Commissioner Ricardo Lara called the new cost-sharing rule a necessary consumer protection action, intended to keep the FAIR Plan solvent without collapsing insurers who'd have otherwise absorbed the full bill and then raised premiums anyway. Consumer Watchdog, an advocacy group, called it something else. We'll be exploring every legal option to protect [consumers] from those surcharges, executive director Carmen Balber said, arguing that homeowners who never filed a claim were now subsidizing a disaster they had nothing to do with.

A pattern, not an outlier

What happened to California's FAIR Plan isn't unique to California, and it isn't really about any one fire season. Thirty-five states plus the District of Columbia now run some version of a FAIR or Citizens plan — a state-managed insurer of last resort, backstopped financially by the private companies operating in that state. All of them were designed the same way: a small, temporary pool for the hardest-to-insure properties, never meant to be anyone's primary option. Florida's version, Citizens Property Insurance Corporation, has swelled past a million policies and is now the largest insurer in the state. California, Florida, Louisiana, Massachusetts and North Carolina each have more than 100,000 properties parked in their state plans, and the mechanism that lets a state plan bill everyone else to stay solvent has its own nickname in Florida: the hurricane tax.

The reason is the same everywhere. Private insurers, facing mounting wildfire and hurricane losses, are declining to renew policies in the riskiest areas, and homeowners who can't find coverage anywhere else end up on the state plan by default, not by choice. A report from the Natural Resources Defense Council gives the resulting spiral a name: a "cycle of doom." As the state plan absorbs more risk and takes bigger losses, it charges bigger assessments on private insurers, which pushes more of those insurers to retreat further, which pushes still more homeowners onto the state plan, growing the pool it was supposed to shrink. Alfonso Pating, the report's author and a global financial regulation analyst at the NRDC, put the mechanism in blunter terms. The private market isn't going to insure properties they know will be flooded 10 times in a row or burn down multiple times, Pating said. Every time an event happens, it's just going to get worse and worse.

What comes off the ledger, and what doesn't

California's FAIR Plan is now seeking a 36% average rate increase on top of the assessment, arguing it needs the extra revenue simply to keep pace with the risk it's carrying, a request still under review by Lara's office. Dave Jones, a former California insurance commissioner who now directs the Climate Risk Initiative at UC Berkeley, has called for a federal reinsurance backstop for state plans nationwide, funded like a public program rather than assembled fire-season by fire-season. We're going to have to look at shoring up FAIR Plans, Jones said. The future is not a good one with regard to insurance availability and pricing because we're not dealing with the root cause of climate change.

None of the fixes on the table change the underlying math: someone has to pay for rebuilding a neighborhood that burns or floods, and the private market is increasingly declining to be that someone. What's shifted since 1993 isn't the existence of the FAIR Plan — it's how much weight the plan is now expected to carry, and how directly that weight lands on people who never filed a claim, never lived near a fire line and never chose to underwrite anyone else's risk.

For more on how insurance costs shift onto people who never filed a claim, see Daybreak Wire's earlier report on force-placed insurance, the coverage homeowners never chose, and for the mechanics of how fire risk itself gets managed before it reaches an insurer's ledger, see what it means when wildfire preparedness hits its highest level.