California FAIR Plan Rate Adequacy and Proposed Increases
Insurance trade organizations have emphasized to California legislators the critical role of rate adequacy in reducing dependence on the California FAIR Plan, the state's insurer of last resort. Victoria Roach, President of the FAIR Plan, presented data to the State Assembly’s Insurance Committee on January 28, revealing that the FAIR Plan manages over 668,000 active policies with a total exposure of approximately $724 billion.
The FAIR Plan's written premium experienced a slight increase from $1.93 billion to $1.96 billion by the last quarter of 2025. Roach attributed this slowed growth to fewer bulk nonrenewals from admitted insurers, highlighting the shift in the insurance industry's dynamics.
Expansion and Challenges of the FAIR Plan
The FAIR Plan has expanded significantly, with operational data showing a 23% increase in policies to 573,700 by March 2025. This growth represents a 74% rise from September 2023 and a 139% increase since September 2021. PIPSO research underscores this trend, indicating a 276% increase in policies from 2018 to 2024, alongside a spike in written premiums to $1.4 billion.
California Department of Insurance reports underline that the FAIR Plan managed about 330,000 residential policies by September 2023, capturing approximately 3–4% of California's homeowners market. The policy exposure increased in tandem, with the Independent Institute estimating exposure at $458 billion by September 2024, revealing significant leverage and risk management challenges within the system.
Proposed Pricing Adjustments
To address these challenges, the FAIR Plan proposed a 35.8% increase in home insurance rates starting spring 2026, integrating wildfire catastrophe models and reinsurance costs for the first time. If approved, this would be the most substantial rate hike in seven years, reflecting advancements in underwriting and regulatory compliance requirements.
Despite a reduction in new policies, carriers in the admitted market struggle with competitiveness. Mark Sektnan from the APCIA informed lawmakers that persistent low FAIR Plan rates hinder depopulation efforts, stating, “You cannot depopulate the FAIR Plan when somebody maintains a FAIR Plan policy for 30 to 40 years because it is cheaper.”
Moving Forward: Regulatory Approvals and Industry Impact
In August 2025, the California Department of Insurance approved the use of advanced wildfire catastrophe models, aligning with Commissioner Ricardo Lara's Sustainable Insurance Strategy. Approvals for Verisk’s US wildfire model and Moody’s RMS US Wildfire Model have been granted, signifying progress in regulatory compliance and risk management initiatives.
Sektnan noted that two insurers received approval under these new guidelines, with more filings underway. While these actions may mitigate nonrenewals entering the FAIR Plan, substantial depopulation is contingent on implementing adequate rate reforms. He concluded, “Hopefully we’ll be able to slow down at least the nonrenewals going into the FAIR Plan, but the depopulation of the FAIR Plan is going to require adequate rates.”