California FAIR Plan Growth Highlights Ongoing Wildfire Insurance Challenges

The California FAIR Plan, originally intended as a last-resort insurer, has expanded significantly over the past decade, now insuring more than 591,000 homeowners, condo owners, and renters. In the first half of 2025 alone, the FAIR Plan increased its policy count by nearly 90,000, underscoring persisting challenges in California's home insurance market, driven primarily by wildfire risks.

Homeowners reliant on the FAIR Plan face affordability and coverage limitations. The standard policy covers only fire, lightning, and explosions, forcing policyholders to purchase additional coverage for other perils like burst pipes and liability, with a coverage cap typically set at $3 million per home. The growing reliance on the FAIR Plan reflects ongoing market instability, as private insurers increasingly restrict coverage in wildfire-prone regions or decline to renew policies. For example, in parts of Fresno County, private insurers have ceased offering new policies, resulting in nearly half of homes being insured solely through the FAIR Plan, often at premium rates far exceeding previous coverage costs. The increased premiums and limited coverage have led to financial strain for many policyholders, forcing cost-cutting measures and leaving some homeowners underinsured amidst continuous wildfire risks.

Recent regulatory reforms in California aim to incentivize private insurers to write more policies in high-risk areas by adjusting pricing regulations and requiring commitments to maintain or expand coverage. These measures, expected to be implemented fully soon, may lead to higher premiums but seek to reduce dependence on the FAIR Plan by encouraging private market participation. Regulators are monitoring insurer compliance and effectiveness of these reforms closely, with the goal of transitioning homeowners away from the FAIR Plan towards private insurance solutions.

Despite these efforts, many residents, particularly in the financially burdened Berkeley Hills and other high-risk zones, remain on the FAIR Plan due to lack of viable private insurance options, underscoring the ongoing challenges of balancing affordability, coverage adequacy, and wildfire risk management in California's insurance market.