The FAIR Plan grew 44 percent in a year and its exposure tripled. A rate hike was coming. The question is whether the numbers behind it, and the claims record behind the fires that caused it, are visible enough to trust.
By Jose Navarro, MBA | The Navarro Report
SAN DIEGO. Starting October 15, the insurer of last resort for hundreds of thousands of California homeowners raises its rates by 29.1 percent. The California Department of Insurance approved that figure for the FAIR Plan after the plan itself had asked for 35.8 percent, a reduction regulators arrived at by trimming the expense and reinsurance cost assumptions while largely accepting the underlying wildfire loss modeling. For a market built to be temporary, the numbers behind that decision are worth examining on their own terms.
The FAIR Plan exists to cover homes that private insurers will not. It was never meant to be most of the market. Yet its policy count grew 44 percent in a single year, from 464,900 policies in fall 2024 to 668,600 by the end of 2025, and total exposure jumped 230 percent over the same period, to $724 billion. A plan designed as a backstop now insures more than two thirds of a million properties, concentrated in the highest wildfire risk areas private carriers have stepped back from.
The January 2025 Palisades and Eaton fires are the proximate cause. The FAIR Plan absorbed roughly $4 billion in losses from those fires, triggered a $1 billion assessment on member insurance carriers, its first since 1994, and issued a $750 million catastrophe reinsurance bond in December 2025 to rebuild its claims-paying capacity. Those are the costs a 29.1 percent rate increase is built to recover. The Department of Insurance’s own review found the FAIR Plan’s forward-looking wildfire catastrophe models, approved in August 2025, credible enough to support most of the requested increase, even as it questioned some of the expense allocation underneath it.
Not every stakeholder agrees the sequence is right. Consumer Watchdog, the advocacy group that has tracked the FAIR Plan’s claims practices for years, argues the plan should resolve an eight year old Department of Insurance enforcement inquiry into claim denials before any rate increase takes effect. Executive director Carmen Balber has said the plan must meet its obligations to policyholders before it collects more from them, pointing specifically to smoke damage payouts the group says have been too small for some Los Angeles fire survivors to rebuild. The Department has not paired the rate decision with a resolution of that inquiry.
The other side of the ledger shows a market in early recovery, not collapse. The Department of Insurance reported in June that FAIR Plan growth has slowed to under 2 percent, and named insurers, including Mercury General, CSAA and Zurich, that are expanding or re-entering coverage under the state’s Sustainable Insurance Strategy, the regulatory framework adopted in 2024 that let insurers use catastrophe models in exchange for writing more policies in high risk areas. If that strategy is working, a shrinking FAIR Plan should be the proof. Whether a one time rate correction count as progress or as a one time bill for past fires is a fair question the Department has not fully answered either way.
A financial controller reads this as a familiar pattern: a liability grows faster than the capital set aside to cover it, and the eventual correction lands all at once rather than gradually. The FAIR Plan’s 230 percent exposure growth against a single rate correction of 29.1 percent is not obviously proportionate, whatever the actuarial modeling behind it. Four in five policyholders would have seen increases between 5 and 60 percent under the original 35.8 percent request, meaning even the trimmed figure still falls unevenly on wildfire-exposed households that often have no other coverage option.
Three disclosures would let homeowners judge the decision for themselves rather than take it on faith. First, the Department of Insurance should publish, alongside every approved FAIR Plan rate filing, the specific loss and expense assumptions it accepted versus those it rejected, in plain language rather than only in the actuarial filing. Second, the pending enforcement inquiry into claims practices should carry a public resolution date, so policyholders are not paying increased premiums into a plan under open investigation indefinitely. Third, the state should report FAIR Plan policy counts and exposure by county each quarter, so San Diego and other wildfire-adjacent regions can see whether the private market is actually returning to their neighborhoods or only to lower risk ones elsewhere in the state.
None of this requires resolving the larger argument over climate risk and insurance regulation. It requires only that the numbers behind a 29.1 percent increase, and the claims record behind the fires that caused it, be as visible to homeowners as they are to regulators.
Jose E. Navarro, MBA, is a financial controller and founder of The Navarro Report, a public finance and government accountability publication based in San Diego, California.
Human-Directed AI Journalism: This article was researched and drafted with AI assistance under the direction, review and editorial control of the author.