Another invoice has come in for the devastating Southern California wildfires: $1 billion. That's how much Ricardo Lara, insurance commissioner, requested from the companies that make up the state's FAIR Plan to solidify the shaky program, Reuters reported.
"Lara also directed those responsible for implementing the FAIR Plan … to hire more staff and utilize all available funds, including reserves and reinsurance funds," Reuters stated.
The two worst blazes in the Los Angeles area, the Palisades and Eaton Fires, began Jan. 7 and killed 29 people and destroyed 16,248 residential, commercial, and other buildings.
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Move somewhere else 🌎 By Feb. 9, residents had submitted 3,469 claims for the former and 1,325 for the latter. The FAIR Plan paid out $914 million, according to Reuters.
While the remittances are a necessary part of the recovery process, they have strained an already fragile system. Across the country, insurance companies are having to cover homeowners who suffer the effects of increasingly frequent and severe extreme weather events, including wildfires and floods, and it's pushing them to stop doing business.
In California and other places, that means policies are not being renewed, and coverage is more expensive if it's available.
The FAIR Plan is costly, too, though, and it usually doesn't protect as many assets as traditional homeowners insurance. The Golden State has established a rule to help people in this regard, requiring insurers to increase their holdings in high-risk zones. But the companies can now charge homeowners for reinsurance, a departure from previous practice. Lara has been criticized for other parts of the plan as well.
At least one startup is hoping to fill this void, though it won't consider homes with values under $2 million.
In September, the FAIR Plan had 451,799 dwelling policies for $431.4 billion of exposure, jumps of 40.9% and 61.3% year-over-year.
"Catastrophe risk modeling firm KCC last month estimated insured loss of about $28 billion from the Los Angeles wildfires, making them the costliest in U.S. history," Reuters reported.
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