January 24, 2025
The California FAIR Plan remains steadfast in its commitment to helping customers and paying all covered claims as soon as possible. The FAIR Plan is actively managing and paying claims.
LA Wildfire Exposure
The latest 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 about 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. We are continuing to gather information related to other fires in Southern California, including the Hughes Fire, and do not have specific exposure estimates at this early juncture.
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.
Historically, actual claims following a fire have represented, on average, about 31% of the total exposure in that area. However, some fires are substantially higher or substantially lower than this historical benchmark.
All Covered Claims Will be Paid
As of January 22, the FAIR Plan has received approximately 2,800 claims for damage caused by the Pacific Palisades Fire and approximately 1,000 claims for damage caused by the Eaton Fire. The claims vary according to the type and amount of coverage and loss. All claims received as of January 22 have been assigned to examiners, and the FAIR Plan is making payments, including advanced payments, to customers.
In situations where independent adjusters are needed to inspect damage, all inspections are required to be in accordance with the California Unfair Practices Act, the Fair Claims Settlement Practices Regulations and all laws relating to property and casualty insurance claims handling.
Customer Support
We understand that experiencing the loss of property is a uniquely challenging, often gut-wrenching, experience that extends far beyond the property itself. We are sensitive to customer concerns and are working hard to help our customers navigate this loss by providing advance payments to help support their immediate needs and paying out all covered claims that enable them to rebuild.
The FAIR Plan has increased staffing levels to help process claims and will continue to increase staff as needed to manage and pay all covered claims. The FAIR Plan has approximately 250 desk examiners and field adjusters working on claims. We use independent adjusting firms where damage inspections are needed. We also contract with third-party catastrophe examiners and adjusters to help meet surging demand, and have hired additional temporary staff, including customer service representatives, to support policyholders during this challenging time.
As of today, the average time for policyholders to reach a live customer service representative is 1 minute, 28 seconds.
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/.
Additional Resources
The FAIR Plan is participating in events led by the California Department of Insurance to help customers file claims and expedite the payment process, including a free two-day workshop on January 25-26 at Pasadena City College and a virtual wildfire insurance town hall on January 30. In addition, the FAIR Plan is holding daily claims webinars for brokers on January 28-31 to help them address customer questions. The FAIR Plan is also collaborating with the California Governor’s Office of Emergency Services to provide resources in support of its Disaster Recovery Centers in Los Angeles. More information is available on www.insurance.ca.gov (California Department of Insurance website), www.caloes.ca.gov (Cal OES) and www.CFPnet.com (FAIR Plan website).
Managing Claims
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.
Prioritizing Available Funding
The FAIR Plan is responsibly prioritizing available funding to pay claims and related expenses. 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, the FAIR Plan currently has reinsurance to cover losses up to $5.78 billion, less deductible and copays. There are varying layers of reinsurance. The first layer available requires the FAIR Plan to meet a deductible for losses up to $900 million and then reinsurance would provide $350 million for additional losses above the deductible. After this initial $1.25 billion, the FAIR Plan can access additional layers of reinsurance up to the total $5.78 billion limit, which includes varying percentages of co-reinsurance, similar to co-pays, 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.
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