CA FAIR Plan’s $1 Billion Assessment – Estimate Your Bill and Recoupment

On February 11, 2025, California Insurance Commissioner Ricardo Lara executed Order 2025-1 approving the California FAIR Plan Association’s request for an assessment in the amount of up to $1,000,000,000 for personal lines or up to $1,000,000,000 for commercial lines in response to substantial historic losses from the January 2025 wildfires and windstorms in the counties of Los Angeles and Ventura, including the Palisades, Eaton, Hurst, Lidia, Sunset, Woodley, and Hughes fires (collectively “January 2025 Southern California wildfires”). This means the FAIR Plan may immediately begin issuing assessment participation notices to its member insurers with payment due within 30 days.

Figure Out Your Bill

As insurance companies are completing the 2024 NAIC Annual Statement filings, member insurers are also preparing to report their participating portion in accordance with SSAP 63, as outlined in JLK Rosenberger’s Insurance Insights on FAIR Plans and How to Account for Them, which illustrates both best practices and practical considerations. A quick check to determine the reasonableness of your calculated Write-in: Equity in Associations account is to apply your participation rate by pool year to the respective open equity by pool year and compare your totals. To illustrate this:

You can take a similar approach to estimate your assessment bill as a member insurer by applying your most recent pool participation rate. In this example, the member insurer’s pool participation rate of 0.04 would result in a ballpark figure of a $40 Million bill for the member insurer. The calculation is a simplification because the assessment will also include commercial lines, although the vast majority of this assessment is expected to be in personal lines. Additionally, actual pool participation for a given year is based on a member insurer’s market share for the second preceding calendar year. (Refer to CIC 10095(c).)

Recoupment

On February 11, 2025, Commissioner Lara issued Bulletin 2025-4 that provides updated guidance regarding insurer recoupment procedures in response to the assessment by the FAIR Plan. Most notably, the member insurer may collect temporary supplemental fees from policyholders to recoup 50% of the amount the member insurer paid for the assessment, with prior approval by the Insurance Commissioner through a submission of a rule-change application request under Prop 103, but only if the assessment payment was not covered by reinsurance or reimbursed through other means. The rule-change applications must be filed within six months from the assessment notice date.