California legislators are pursuing greater oversight of the California FAIR Plan Association, the state’s insurer of last resort for property coverage, as the threat of wildfires continues to grow, AM Best reported.
Assemblymember Lisa Calderon has introduced Assembly Bill 234, or AB 234, which proposes adding two non-voting, ex officio members to the FAIR Plan’s governing committee in an effort to enhance transparency.
Under the bill, the speaker of the assembly and the chair of the senate committee on rules, or their designated representatives, would join the nine-member committee currently composed of insurance carrier representatives. The committee also includes four non-voting members representing agents, brokers, surplus line brokers, and the public, who are appointed by the governor.
According to the bill, the FAIR Plan has seen rapid growth in recent years, and concerns have been raised about its ability to cover claims in the event of a catastrophic fire. AB 234 includes an urgency statute, allowing it to take effect immediately upon passage.
The legislation is part of broader efforts to address challenges posed by California’s wildfire risks. Another proposal, the FAIR Plan Stabilization Act (AB 226), aims to strengthen the financial stability of the association. The act would authorize the California Infrastructure and Economic Development Bank to issue bonds and provide the FAIR Plan with access to a line of credit if liquidity issues arise.
Calderon described AB 226 as a measure to reduce uncertainty for policyholders in the event of solvency concerns. “It would also provide a financial buffer for the FAIR Plan by allowing it to seek a line of credit if they need it,” Calderon said.
She emphasized the importance of finding solutions to support Californians in securing affordable insurance, noting the state’s leadership in many areas, including its economy, which ranked as the fifth-largest in the world in 2023.
In addition to legislative initiatives, the California Department of Insurance (CDI) has implemented moratoriums on policy non-renewals and cancellations in ZIP codes impacted by wildfires. The department is also collaborating with Los Angeles District Attorney Nathan Hochman on a campaign to combat insurance fraud targeting wildfire victims. This initiative includes raising fraud awareness and providing support to survivors navigating the recovery process.
As of 2023, the five largest homeowners multiperil insurers in California, based on direct premiums written, were State Farm Group (19.92%), Farmers Insurance Group (14.93%), CSAA Insurance Group (6.52%), Liberty Mutual Insurance Cos. (6.5%), and Mercury Casualty Group (6.11%), according to BestLink.