California’s Lara Hits Insurers for $1 Billion to Pump up FAIR Plan

California Insurance Commissioner Ricardo Lara has ordered the insurance companies covering homes on the state’s FAIR Plan to be assessed $1 billion so the FAIR Plan can meet its financial responsibilities.

Once they receive the request, insurers have 30 days to pay the assessment. In return, they can collect half of what they pay back through policy fees.

American Property Casualty Insurance Association (APCIA) vice president, Mark Sektnan said the assessment is needed to reduce the payout pressure on the FAIR Plan and to keep people from canceling policies. This — he said — will help the long-term health of the insurance market in California.

While Paul Martin — a vice president with the National Association of Mutual Insurance Companies (NAMIC) — agrees, he noted the FAIR Plan needs to increase its funding options. Those options would include actuarily sound rates.

On funding options, Lara agrees.

“We must take action to improve the financial standing of the FAIR Plan and prevent this situation from recurring. I strongly support legislation this session — just as I did last session — that would allow the FAIR Plan to access credit lines and catastrophe bonds to help pay claims in worst-case scenarios,” he said. “I urge the Legislature to act quickly and send it to the Governor's desk.”

Lara said the idea behind his insurance reforming Sustainable Insurance Strategy was to make the state’s homeowners insurance market healthy. This is a big step toward reaching that goal.

“The fact that we are once again facing this issue 30 years after wildfires devastated these same communities highlights the need for change,” Lara said. “Thirty years of stagnant regulations have placed more people at risk. We will move people away from the FAIR Plan, and insurance companies will write more policies under the Sustainable Insurance Strategy I finalized last year.”

Source link: California Department of Insurance — https://bit.ly/4jXAx7H

Source link: Insurance Business America — https://bit.ly/41kcAQt