California FAIR Plan Set to Raise Premiums by 30% Amid Wildfire Risks
Starting in October, the California FAIR Plan will implement a significant rate increase for its residential policyholders, affecting approximately 663,000 customers. Overall, premiums are poised to rise by nearly 30%, with specific adjustments varying by individual circumstances. Approximately half of the policyholders will experience rate increases between 30% and 50%, while 25% may see decreases of up to 80%. The revised premiums will take effect at each policy's renewal date after October 15.
Grizzly Flats, in the Sierra Nevada foothills, is one of the areas most impacted by these changes, with nearly 150 policyholders seeing their annual premiums rise from an average of $2,671 to $5,485. Conversely, San Francisco policyholders are expected to benefit from rate reductions. In Orinda’s 94563 ZIP code, policyholders will experience an average rate increase of 31%, raising typical premiums to nearly $7,000.
A spokesperson for the FAIR Plan attributed the rate changes primarily to adjustments in the wildfire risk component of premiums. Properties at higher wildfire risk will see a greater increase compared to those at lower risk, with the potential for some policyholders to receive decreased rates. This marks the first statewide rate adjustment since 2023, when premiums increased by 15.7%.
The FAIR Plan, designed as California's insurer of last resort, has seen its policy count double due to the state’s insurance market challenges. Although growth has continued, its pace has moderated. Insurance Commissioner Ricardo Lara noted this trend as a potential sign of market recovery. The FAIR Plan covers fire damage, while additional coverage for other risks, such as water damage or liability, requires separate policies from other insurers.
The need for increased premiums stems from the FAIR Plan's rapid growth and financial strain from recent large-scale wildfires. Following the 2025 Eaton and Palisades wildfires, private insurers faced a legal mandate to contribute to a $1 billion shortfall in claims funding, affecting their customers.
FAIR Plan President Victoria Roach indicated the necessity for substantial rate adjustments to manage growth and prepare for future wildfire events. Initially, the FAIR Plan requested a 36% increase but reduced the request under reforms by the Department of Insurance’s Sustainable Insurance Strategy. These reforms allow the use of forward-looking risk models for assessing wildfire risk and incorporating reinsurance costs into premium calculations. Similar rate increases have been approved for other insurers, including Farmers Insurance Group and Mercury Insurance. The FAIR Plan also offers discounts for homeowners who implement wildfire mitigation measures on their properties.