P&C Insurance Daily

California Insurance Commissioner Ricardo Lara has approved temporary expansion of FAIR Plan coverage for high-value commercial properties and homeowners associations, with coverage limits up to $20 million per building through 2028. The reform effort seeks to restore the FAIR Plan to its original purpose as a temporary solution rather than a permanent backstop by requiring insurance companies to write policies in wildfire-distressed areas if they want to use forward-looking models in their rate calculations.

The California Department of Insurance is currently investigating how the FAIR Plan has handled smoke and soot damage claims from the Los Angeles wildfires, responding to consumer complaints about coverage gaps for microscopic contamination. Commissioner Lara has demanded that the FAIR Plan improve its claims process, hire additional staff, and shift costs away from consumers to expedite recovery assistance.

The January Palisades and Eaton wildfires in Los Angeles destroyed more than 16,000 structures with insured losses expected to exceed $30 billion, placing global catastrophe losses at an estimated $50 billion in the first quarter of 2025. The escalating wildfire activity—with more than 28,000 wildfires burning over 1 million acres year-to-date—has forced insurers to reexamine underwriting strategies through premium increases, capacity limitations, and strategic market exits.

Insurance Commissioner Ricardo Lara has proposed stricter funding rules for consumer groups that challenge insurer rate hikes under Proposition 103, sparking controversy between regulators and consumer advocates. Home insurance costs in California are expected to rise in the near future due to Lara’s recent changes to the state’s insurance rules and industry dynamics.

FAIR plans now operate in 35 states and the District of Columbia, covering nearly three million properties and more than $1 trillion in exposure, as private insurers continue to limit capacity in wildfire-prone and climate-vulnerable regions. The growing reliance on these insurer-of-last-resort programs reveals systemic limitations, with disputes over covered damage expected to intensify as climate-driven events become more frequent and complex.