California Insurance Commissioner Ricardo Lara approved a California FAIR Plan request for a $1 billion assessment on admitted market insurers to cover claims from the Los Angeles wildfires.
The FAIR Plan reported it has paid more than $914 million to policyholders, including advance payments, to cover claims related to the Palisades and Eaton fires.
As of Feb. 9, the FAIR Plan has received roughly 3,469 claims for damage caused by the Palisades Fire and roughly 1,325 claims for damage caused by the Eaton Fire. The claims vary according to the type and amount of coverage and loss. Roughly 45% of the wildfire claims are reported as total losses, 45% reported as partial losses, and 10% as fair rental value only, which covers lost rental income due to a covered peril, according to the FAIR Plan.
A handful of major California insurers have reported losses in excess of $1 billion from the Los Angeles area wildfires.
The Travelers Companies Inc. announced Tuesday it will lose an estimated $1.7 billion from last month’s wildfires, which swept through the region and destroyed tens of thousands of homes earlier this month. The L.A. wildfires could result in total losses of up to $164 billion and insured losses of up to $40 billion, according to preliminary estimates.
The FAIR Plan’s Accounting Subcommittee and Governing Committee each recommended an assessment of $1 billion, which enables the FAIR Plan to access additional available layers of reinsurance and maintain operations.
Generally, assessments are based on an insurer’s market share of dwelling and commercial policies in place from two years ago.
The FAIR Plan is also accessing reinsurance as a payment mechanism to help pay claims.
To date, it has met its $900 million deductible and has accessed $350 million in reinsurance. The FAIR Plan can access additional layers of reinsurance based on losses incurred and outstanding reserves up to a $5.78 billion limit, which includes varying percentages of co-reinsurance, similar to co-pays, subject to certain conditions. To access all layers of available reinsurance, the FAIR Plan is responsible for paying up to roughly $3.5 billion, including the $900 million deductible, and copays, according to the FAIR Plan.
The FAIR Plan was established by statute in 1968 as the state’s insurance safety net. Every property insurance company licensed in California becomes a FAIR Plan member as a condition of doing business in California.
Topics
Catastrophe
Natural Disasters
Wildfire
Louisiana
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