Navigating California’s $1 Billion FAIR Plan Assessments on Member Insurers: What California Insurers Need to Know

At a Glance

• Due to severe losses from the 2025 Los Angeles wildfires (Palisades and Eaton fires), the FAIR Plan has incurred $4 billion in estimated claims and is issuing a $1 billion assessment on member insurers.
• Insurers can recoup 50% of their assessment payments from policyholders but must obtain prior approval from the CDI under Proposition 103.
• If FAIR Plan assessments exceed $1 billion, insurers may recover 100% of the excess amount, subject to CDI approval.
• Any recoupment must be temporary, revenue-neutral and not classified as premium — it cannot be included in future rate filings.
• The FAIR Plan remains a critical backstop, but the Commissioner emphasizes modernization efforts to strengthen its financial stability.

Earlier this month, the California CDI approved $1 billion in FAIR Plan Assessments and issued Bulletin 2025-4, providing updated guidance on how insurers can recoup assessments from policyholders.

Why This Matters to Insurers

• Financial Impact & Cost Recovery
  • The $1 billion assessment represents a significant financial burden for property insurers.
  • The ability to recoup 50% of payments (or more if assessments exceed $1B) provides relief, but insurers must strictly comply with CDI approval processes.
• Regulatory Oversight & Compliance Risks
  • CDI closely monitors insurer recoupment practice, and any unauthorized cost recovery could trigger enforcement actions.
  • Rule-change applications must be submitted within six months of assessment notice issuance, or insurers lose the ability to recoup.
• Market Stability & FAIR Plan Solvency
  • The Commissioner underscores the FAIR Plan’s financial fragility and the need for reform.
  • A well-funded FAIR Plan is essential to maintaining market stability in high-risk wildfire areas.
• Consumer Transparency & Communication
  • Insurers must clearly disclose any temporary supplemental fees to policyholders, ensuring transparency and avoiding potential disputes.

Considerations for Insurers

• Evaluate assessment impact and determine eligibility for recoupment.
• Submit CDI rule-change applications within six months to secure cost recovery.
• Ensure transparency with policyholders regarding any temporary fees.
• Monitor FAIR Plan developments as the CDI pushes for long-term reform.

With CDI’s heightened focus on insurer accountability and FAIR Plan sustainability, insurers must stay proactive to navigate these evolving regulatory challenges effectively.