Massachusetts FAIR Plan Sees Largest Enrollment Increase Since 2007 Amid Climate Risk

Massachusetts saw a significant increase in enrollment in its insurer of last resort, the FAIR Plan, with over 173,000 policies in fiscal year 2024, up from 158,660 in 2023. This marks the largest year-over-year growth since 2007 and the first rise since 2017. The increase is driven primarily by high nonrenewal rates from private insurers, particularly in coastal regions vulnerable to severe storms, where cancellations and nonrenewals have surged sharply between 2022 and 2024. The state's insurance commissioner reported that many top insurers have implemented measures to reduce exposure to climate-related risks, including limiting coverage in risk-prone coastal areas. Additionally, global reinsurers have offloaded riskier policies following multiple years of natural disaster losses, further constraining the private insurance market. Despite these challenges, Massachusetts maintains a relatively robust homeowner insurance market compared to states like Florida or California, which face greater risks from hurricanes and wildfires. About 40% of homes in areas like Cape Cod and the islands are insured through the FAIR Plan, reflecting a shift of risk concentration towards coastal zones previously dominated by private insurers. The FAIR Plan, established in 1968, provides coverage to residents unable to secure private insurance, operating its own policy system but able to levy assessments on private companies when losses accumulate. While FAIR Plan policy numbers have fluctuated over time, the current surge calls attention to emerging market pressures tied to climate change and high rebuilding costs in the state. Rising premiums in the private market, influenced by inflation, tariffs, and climate risks, have made FAIR Plan policies financially attractive, particularly to lower and moderate-income households since the FAIR Plan's rates have remained unchanged since 2006. This dynamic raises concerns about the sustainability of the plan under increased storm risks. Massachusetts counties all saw growth in FAIR Plan enrollments, with some like Worcester experiencing a 25% increase year-over-year. Yet, the overall number of FAIR Plan policies in Massachusetts remains stable relative to historical highs, underscoring the ongoing presence of private insurers in the state. Compared to other states, Massachusetts’ FAIR Plan is less strained, but rising trends in similar plans in neighboring states indicate regional shifts in insurance risk distribution. Industry experts emphasize the importance of monitoring these trends over multiple years to understand long-term implications and market stability. Policy changes by private insurers and their reinsurers aim to rebalance risks, with hope that the recent increase in FAIR Plan policies is a transient adjustment rather than a persistent trend. The state’s relative protection from extreme weather events has so far prevented more acute market disruptions. However, insurance stakeholders remain vigilant due to the FAIR Plan's growing exposure along the coast, where major storms could result in substantial claims and potential assessments on insurers, passing costs to consumers. Balancing the FAIR Plan’s role as both insurer of last resort and affordable coverage provider presents ongoing challenges. Experts note that the evolving climate risk landscape may outpace existing insurance frameworks designed under different conditions, potentially shifting greater financial risk and mitigation costs onto public entities. The insurance market, regulators, and communities face critical decisions regarding future risk management and insurance capacity. While Massachusetts is navigating these complexities better than some states, the situation highlights the need for continued attention to climate-driven risk exposure, market capacity, and the sustainability of solutions like the FAIR Plan in safeguarding property and economic stability across the region.