Evelyn PimplaskarEditor-in-Chief, Director of Content
10+ years in insurance and personal finance content
30+ years in media, PR, and content creation
Evelyn leads Insurify’s content team. She’s passionate about creating empowering content to help people transform their financial lives and make sound insurance-buying decisions.
7+ years in business and financial services content
Chris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.
John leads Insurify’s copy desk, helping ensure the accuracy and readability of Insurify’s content. He’s a licensed agent specializing in home and car insurance topics.
Published September 11, 2024 at 5:00 PM PDT | Reading time: 3 minutes
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California homeowners and businesses could face hefty temporary property insurance fees if the state’s insurer of last resort ever suffers losses that push it to the brink of insolvency.
The state’s Fair Access to Insurance Requirements (FAIR) Plan provides coverage for residential and commercial properties that may not be able to get insurance through the standard market. California requires private home insurers who do business in the state to participate in the FAIR Plan.
If the plan ever faces a large volume of claims from a single event that threatens to overwhelm the insurer’s solvency, it can ask the state’s insurance commissioner to approve a special assessment on FAIR Plan member insurance companies.
“In the highly unlikely event that the Plan is substantially threatened with insolvency, the FAIR Plan may levy an assessment on its member insurers, with the insurance commissioner’s prior approval,” Insurance Commissioner Ricardo Lara said in a Sept. 3 bulletin to FAIR Plan member insurance companies.
The Plan last levied such an assessment in 1994, according to the bulletin. FAIR Plan member companies can, in turn, ask the state for permission to pass some or all of the assessment costs on to policyholders in the form of temporary fees, Lara said.
FAIR Plan changes
Increasing wildfire risks and catastrophic weather events have made it difficult and costly for many Californians to find homeowners or commercial insurance. Insurance companies also cite the state’s strong consumer protection law, Proposition 103, as an obstacle to profitability for insurers operating in California.
When property owners can’t find coverage elsewhere, they turn to the state’s 50-year-old FAIR Plan. The number of Californians buying FAIR Plan coverage has steadily increased in recent years. In 2023, the insurer of last resort reported 89,995 residential and commercial policies on its books. In the first nine months of 2024, the number of policies ballooned to 134,576.
The Department of Insurance has repeatedly identified California’s FAIR Plan as a point of vulnerability in the state’s insurance market.
“While the FAIR Plan is a vital safety net, its expansion creates a negative feedback loop,” the department said in a July press release. “When the FAIR Plan takes on more customers, it causes traditional insurance companies to withdraw from certain areas, further increasing dependence on the FAIR Plan.”
Insurers may leave high-risk areas to avoid the possibility of major assessments by the FAIR Plan.
Commissioner Lara has taken multiple actions aimed at shoring up the state’s struggling property insurance market since taking office in 2019. Updates to California’s FAIR Plan included raising coverage limits to $3 million for residential properties and to $20 million per building for commercial policies.
Sheltering insurers from assessment losses
Lara’s Sept. 3 bulletin details a path for insurers to recoup their money from policyholders if the FAIR Plan wins DOI approval to issue a special assessment. Insurers may “collect supplemental fees from their own policyholders, in the lines that were assessed.” The percentage insurers can recoup varies based on the types and policy limits insurers sell in affected lines and the assessment amount.
Policy Types and Limits
▲▼
FAIR Plan Assessment
▲▼
Recoupment Limit
▲▼
$3 million or less residential
Up to $1 billion
50%
$20 million or less commercial
Up to $1 billion
50%
$20 million or less for residential and commercial
Up to $2 billion
50%
$3 million or less residential
Over $1 billion
100%
$20 million or less commercial
Over $1 billion
100%
$20 million or less residential and commercial
Over $2 billion
100%
$20 million per structure / $100 million per location commercial
Any amount
100%
Allowing FAIR Plan insurers to recoup assessment losses from policyholders will help keep California’s property insurance market stable and property insurance available in the state, the bulletin notes multiple times.
What’s next: Potential effect on California’s insurance market
California insurers have responded to escalating losses and risks by limiting their homeowners, commercial, and fire insurance business in the state, seeking double-digit rate increases, or withdrawing from the California market altogether. Most recently, Liberty Mutual announced it won’t renew 17,000 dwelling fire policies, and American National filed with the DOI to non-renew all its homeowners policies.
Allowing insurers to recoup FAIR Plan assessments will help ensure “a stable and solvent FAIR Plan,” Lara said in the bulletin.
“I believe this sounder financial sustainability structure is necessary to ensure the FAIR Plan’s financial resiliency,” Lara said. The approach “is similar to other existing California insurance safety net mechanisms, in place today, where insurers may assess policyholders in the highly unlikely event of an insurer insolvency, such as the California Insurance Guarantee Association, the California Life and Health Insurance Guarantee Association, and the California Earthquake Authority.”
Evelyn PimplaskarEditor-in-Chief, Director of Content
Evelyn Pimplaskar is Insurify’s director of content. With 30-plus years in content creation – including 10 years specializing in personal finance – Evelyn’s done everything from covering volatile local elections as a beat reporter to building fintech content libraries from the ground up.
Before joining Insurify, she was editor-in-chief at Credible, where she launched and developed the lending marketplace’s media partnership’s content initiative and managed the restructuring of the editorial team to enhance content production efficiency. Formerly, as tax editor for Credit Karma, Evelyn built a library of more than 300 educational articles on federal and state taxes, achieving triple-digit year-over-year growth in e-files from organic search.
Her early career included work as a content marketer, vice president and managing officer of a boutique public relations agency, chief copy editor for 14 weekly Forbes publications, reporting for large and mid-sized daily newspapers, and freelancing for the Associated Press.
Evelyn is passionate about creating personal finance content that distills complex topics into relatable, easy-to-understand stories. She believes great content helps empower readers with the information they need to make important personal finance decisions.
7+ years in business and financial services content
Chris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.
John leads Insurify’s copy desk, helping ensure the accuracy and readability of Insurify’s content. He’s a licensed agent specializing in home and car insurance topics.
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