January 17, 2025
Our No. 1 focus remains on serving our customers and ensuring all covered claims
are paid. The Southern California wildfires have been devastating for families and
communities, far beyond the loss of property, and the FAIR Plan is actively
managing and paying claims.
Wildfire Exposure
Initial estimates approximate that about 22% of the structures in the CAL FIRE
incident map for the Pacific Palisades Fire are covered by the FAIR Plan, and
approximately 12% of the structures in the CAL FIRE incident map for the Eaton
Fire are covered by the FAIR Plan.
The FAIR Plan has a total potential exposure of over $4 billion for the Pacific
Palisades Fire, and a total potential exposure of over $775 million for the Eaton
Fire, according to the CAL FIRE incident maps. These numbers are developing as
more information is gathered.
While each fire is unique, for context, actual claims following a fire have
historically represented, on average, about 31% of the total exposure in that area.
Please note that some fires are substantially higher or substantially lower than this
historical benchmark.
It is important to note that “exposure” does not equal “loss.” Exposure means the
total amount of insurance for a particular property or group of properties. It does
not equate to the number of claims made or the anticipated claims and expense
payments related to those claims.
Managing Claims
The FAIR Plan has received over 3,600 claims. Claims vary according to the type
and amount of coverage and loss.
Once a claim is received by the FAIR Plan, an adjuster will contact the customer as
soon as possible. We are actively reaching out to policyholders in the order in
which claims were received. The FAIR Plan is increasing staffing levels to help
process claims.
Submitting a Claim
We encourage affected customers to submit a claim anytime on our website at
www.CFPnet.com. If customers have questions and/or difficulty submitting a
claim online, they can call 800-339-4099. Customers can also work with their
broker to submit a claim on their behalf.
More information about submitting a claim and what to expect after doing so is
available at https://www.cfpnet.com/claims/.
All Covered Claims Will be Paid
The FAIR Plan, a not-for-profit catastrophe insurer, has the payment mechanisms
in place to ensure all covered claims will be paid. The FAIR Plan operates on a
cash-in, cash-out basis, meaning its financial situation evolves daily. We
continually monitor our financial position and whether we will need to tap into
available payment mechanisms to ensure all claims are paid. The situation is
ongoing and remains fluid.
Payment Mechanisms
Prioritizing Available Funding
The FAIR Plan is responsibly prioritizing available funding to pay claims and
expenses arising out of the Southern California wildfires. The FAIR Plan monitors
its financial position daily, evaluating cash on hand, which includes surplus funds
as well as other funds typically reserved for liabilities, such as loss reserves and
expenses.
Reinsurance
The FAIR Plan also has reinsurance available to help pay claims. Reinsurance,
which is akin to “insurance for insurance companies,” is a common and prudent
business practice that helps insurers responsibly manage their financial risk by
sharing it with other insurers.
For the Pacific Palisades and Eaton fires, subject to certain conditions, the FAIR
Plan is able to access reinsurance once the first $900 million in claims are
incurred, similar to meeting a deductible. Reinsurance can be fully accessed for
the next $350 million of claims payments, subject to certain conditions. After this
initial $1.25 billion, there are various levels and percentages of co-insurance
(similar to a co-pay percentage) between reinsurance and the FAIR Plan or
admitted market insurers – up to a total of $5.78 billion, shared between
reinsurers and the FAIR Plan, subject to certain conditions.
Assessment
In addition to reinsurance, another payment mechanism available to the FAIR Plan
is a market assessment. By statute, the FAIR Plan, with the approval of the
California Insurance Commissioner, has the right to assess all admitted insurers
licensed to sell and selling property insurance in California to help pay for FAIR
Plan losses. If there is an assessment, according to statute, it would be based on
each insurer’s California market share from two years ago. The last time the FAIR
Plan issued an assessment was in 1994.
The FAIR Plan has not yet asked the California Insurance Commissioner for an
assessment in response to the Southern California fires. We continually monitor
our financial position and whether we will need to request that an assessment be
issued.
If an assessment is issued, the FAIR Plan does not have a role in determining how
insurers manage costs associated with the assessment.
While the situation is ongoing and fluid, the FAIR Plan remains vigilant in working
with its customers in these challenging times.
Assembly Bill 226
The FAIR Plan supports Assembly Bill 226, introduced on January 9, 2025, by
Assemblymembers Lisa Calderon and David Alvarez, which would authorize FAIR
Plan access to bonds, loans, and lines of credit as approved by the California
Department of Insurance.
We appreciate the collaboration with the Governor’s Office, California Legislature,
California Department of Insurance and stakeholders in helping to ensure the
stability of the insurance market.
The above information can be attributed to the California FAIR Plan.
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About the FAIR Plan
The FAIR Plan is a private association comprised of all insurers licensed to
write property insurance in California and is funded primarily through the
policies it sells to customers. The FAIR Plan is not a state agency and is not
funded by the state or other public agencies.
The FAIR Plan offers basic property insurance for all Californians who cannot
access coverage in the voluntary insurance marketplace. As an insurer of
“last resort,” the FAIR Plan was established by statute to provide a temporary
safety net for consumers who need fire insurance until coverage through the
voluntary market is available. For more information, visit CFPnet.com.
For questions contact:
media@cfpnet.com