California FAIR Plan Legislation Moves through the Legislature

California Insurance Commissioner Ricardo Lara very strongly supports Assembly Bill 225, the FAIR Plan Stabilization Act. It has passed the California Assembly and has moved to the Senate.

Lara is the chief sponsor of the bill. It was introduced by Assemblymembers Lisa Calderon and David Alvarez. If eventually passed and signed by Governor Gavin Newsom, the bill will allow the California Infrastructure and Economic Development Bank to issue bonds giving the FAIR Plan a line of credit if it is in need of funds.

“Protecting California policyholders requires a stronger FAIR Plan that can withstand major wildfire disasters. AB 226 builds on the many actions I have taken to fix the FAIR Plan through increased oversight and financial planning,” Lara said. “I am sponsoring this important bill to build on our record and provide the financial buffer of allowing the FAIR Plan to seek a line of credit in case it is needed — with solid financial footing reducing the impact of another major disaster on all Californians.”

Assemblymember Calderon chairs the Assembly’s insurance committee and a co-author of the bill.

“AB 226 stabilizes the FAIR Plan by allowing bonds to spread costs over time, preventing sudden insurer assessments that could spike premiums or bankrupt small companies,” she said. “This urgent fix protects homeowners and safeguards our insurance market from catastrophic failure. I look forward to seeing this critical bill make its way through the senate.”

The FAIR Plan is currently experiencing some financial difficulty. The LA wildfires will cost the plan about $4 billion. To help cover those costs, the FAIR Plan management issued a $1 billion assessment to the member, admitted insurance companies to help cover those costs.

However, it’s not enough. FAIR Plan President Victoria Roach said the plan has just $510 million in unallocated cash that it can put toward its $900 million reinsurance deductible. When looking at the entire reinsurance picture, the plan has to come up with $3.5 billion in payments to access all layers of its reinsurance.

Source link: California Department of Insurance — https://bit.ly/4clI0dc

Source link: PropertyCasualty360.com — https://bit.ly/43GcYdR