California Raises FAIR Plan Coverage Limits to Address Insurance Gaps in Wildfire Zones

The California FAIR Plan, originally created as an insurer of last resort, has rapidly evolved into a critical safety net for homeowners and businesses unable to find coverage due to wildfire risk. As traditional insurers continue pulling out of high-risk areas, over 350,000 properties are now covered by the FAIR Plan—nearly triple the number from five years ago. To address the growing need, Insurance Commissioner Ricardo Lara has approved a significant increase in the Plan’s commercial property coverage limits. Now, it can offer up to $20 million per building and $100 million per location, more than double previous limits.

This change comes in response to intensifying wildfire activity across the state, which has triggered billions in claims and led major insurers like State Farm and Allstate to halt new policies in vulnerable regions. While the expanded limits provide immediate relief for developers and community associations struggling to find adequate coverage, experts caution that this could strain the FAIR Plan’s long-term financial stability if catastrophic claims continue to rise.

To mitigate these risks, the California Department of Insurance is implementing stricter oversight and introducing market-stabilizing reforms. These include allowing catastrophe modeling in rate-making and promoting community wildfire mitigation efforts. The broader goal is to attract private insurers back into the market while maintaining essential coverage options for those in high-risk zones.

Although this expansion marks a vital step in addressing the insurance access crisis, it remains a temporary measure. Long-term sustainability will depend on comprehensive reforms and a collaborative effort between regulators, insurers, and communities to adapt to California’s evolving climate risks and insurance landscape.