P&C Insurance Daily

Commissioner Ricardo Lara has approved temporary expansion of FAIR Plan coverage for high-value commercial properties, homeowners associations, and affordable housing developments effective July 26, 2025, with coverage limits up to $20 million per building and $100 million per location. The reforms aim to restore the FAIR Plan to its original purpose as a temporary solution while requiring insurers to write policies in wildfire-distressed areas if they want to use forward-looking models or reinsurance costs in their rates.

California’s property insurance crisis stems from devastating wildfires combined with ineffective regulatory constraints that have prevented insurers from adequately assessing wildfire risks and incorporating reinsurance costs into rates. Since 2022, seven of the twelve largest insurance companies have limited new policies in the state, leaving homeowners with limited options and overwhelming the FAIR Plan, which faces a potential $458 billion exposure.

Eleven California wildfires generated $50 billion in insurance claims during the first quarter of 2025, adding approximately three percentage points to the industry’s net combined ratio and depleting nearly half of the industry’s annual catastrophe budget. Insurers continue adapting strategies by becoming more selective with risk appetites, particularly in high-risk areas, and enhancing underwriting measures to mitigate potential losses.

At the halfway point of 2025, the P&C insurance industry continues to demonstrate adaptability and strength despite increased claims severity from severe convective storms and historic California wildfires. Homeowners insurance premiums earned increased 12.8% while direct losses surged 30.9%, resulting in a 10.8-point increase in the combined ratio.

Governor Gavin Newsom is facing pressure to remove Insurance Commissioner Ricardo Lara as Los Angeles wildfire policyholders struggle with delayed claims months after the disaster. The calls for his resignation highlight ongoing frustration with the state’s handling of the insurance crisis and claims processing challenges faced by fire survivors.