The Insurance Program That Was Never Supposed to Cover Wildfire

The California FAIR Plan did not start as a response to wildfire. It started as a response to the Watts Riots.

Most Californians who know the FAIR Plan know it as the insurer of last resort in fire-prone communities. It is the backstop when no private carrier will write your policy.

That understanding is not wrong. It is incomplete. Where the plan came from, and how far it has traveled from its original purpose, tells you something important about how California ended up here and what this crisis actually is.

The historian Bench Ansfield of Temple University has drawn that history out most clearly. His commentary for CalMatters traced the plan back to the Watts uprising rather than to wildfire. What follows tracks the documentary record, including the reports of the two federal commissions that produced the FAIR Plan model.

South Central Los Angeles, 1965

In August 1965, a traffic stop in the Watts neighborhood of Los Angeles escalated into six days of unrest that left 34 people dead, more than 1,000 injured, and an estimated $40 million in property damage. The curfew zone imposed to contain it covered roughly 46 square miles of the city.

When the smoke cleared, insurance adjusters arrived to assess the losses.

What happened afterward was, in retrospect, as consequential as the uprising itself.

Private insurers looked at the neighborhoods of South Central Los Angeles and decided they were uninsurable. Policies were canceled. Renewals were declined. What coverage remained available carried premiums that many of the households and businesses on those blocks simply could not pay. For the pharmacists, the grocers, and the hardware store owners trying to rebuild, insurance became close to unobtainable at any price that made sense.

This pattern was not new. Insurers had long engaged in what became known as redlining: refusing to write coverage in neighborhoods designated as high risk, using ZIP codes or street boundaries as proxies for race. The federal government had codified the same logic in the 1938 FHA Underwriting Manual, which instructed appraisers to treat the arrival of what it called “inharmonious racial groups” as an adverse influence on property values. The insurance industry ran its own parallel version, and it ran it quietly.

Research published by the Federal Reserve Bank of Chicago, in Chicago Fed Letter No. 484 of September 2023, mapped what came of it. The researchers compared Brooklyn neighborhoods that the Home Owners’ Loan Corporation had redlined in the late 1930s against the areas where the most FAIR Plan policies were written in the late 1970s. The overlap was striking. Four decades on, the same boundaries were still sorting the same neighborhoods. What had changed was who was covering them. That the FAIR Plan had become the primary insurance mechanism in exactly those areas is the clearest available measure of how completely the private market had withdrawn from them.

Watts brought the practice into public view in a way that was difficult to ignore.

The federal answer: two commissions and riot reinsurance

In 1967, responding to that summer’s urban unrest, President Johnson appointed two parallel commissions to study the consequences of the upheaval.

The National Advisory Commission on Civil Disorders, known as the Kerner Commission, examined the systemic racial and economic causes behind the uprisings. Its report was released February 29, 1968. It warned that the nation was “moving toward two societies, one black, one white,” and that they would be “separate and unequal.”

A companion panel, the President’s National Advisory Panel on Insurance in Riot-Affected Areas, focused on one specific mechanism of that separation: the insurance market itself. Detroit’s July 1967 uprising, which caused $132 million in property damage, had turned the urban insurance problem into a national emergency.

The Hughes Panel’s report, published January 27, 1968, was unambiguous. Private insurers were systematically withdrawing from urban areas, and that withdrawal was accelerating the physical deterioration and economic abandonment of those communities. The panel recommended a federal and state partnership that would require states to make property insurance available “without regard to environmental hazards” in exchange for access to federally subsidized riot reinsurance.

Congress responded that summer. The Urban Property Protection and Reinsurance Act of 1968, signed August 1, 1968 as Title XI of the Housing and Urban Development Act, set the framework. The mechanics were straightforward. The federal government would make riot reinsurance available to insurers, but only in states that established qualifying Fair Access to Insurance Requirements programs. Twenty-six states, the District of Columbia, and Puerto Rico enacted FAIR Plans under the program. California passed its own version, Assembly Bill 1577, that year, codified at California Insurance Code section 10090.

Here is the part worth sitting with. The FAIR Plan’s name, “Fair Access to Insurance Requirements,” was a civil rights concept, not an insurance product concept. The word “fair” meant equitable access for urban property owners who had been shut out of the private market. It had nothing to do with the fair pricing of wildfire risk in the Santa Monica Mountains.

What the FAIR Plan was designed to be

The California FAIR Plan that came into existence in 1968 had several specific characteristics, most of which are poorly understood today.

It was narrow by design. The plan provided basic property insurance covering fire, lightning, and internal explosion. It was not a homeowners policy. There was no liability coverage, no theft protection, and no additional living expense coverage if a home became uninhabitable.

Policyholders who wanted more had to buy a separate “Difference in Conditions” policy from the private market. The FAIR Plan covered the named perils. A DIC policy filled the gaps. Together they were supposed to approximate a full homeowners policy. In practice they meant two transactions, two carriers, and two claims processes when something went wrong.

It was urban, and primarily commercial. The California Assembly Insurance Committee’s own background paper on the plan states it plainly: “At inception, that was essentially urban commercial property.” The small business owners of South Central Los Angeles and similar neighborhoods were the intended beneficiaries. Residential coverage expanded later, but the program’s original population was commercial.

Is the FAIR Plan a government agency?

No. The FAIR Plan is a private association of insurers operating under state regulatory oversight, and it receives no taxpayer funding. Every insurer licensed to write basic property insurance in California is required, as a condition of doing business in the state, to be a member. Losses are shared in proportion to each member’s share of the California market.

Governance sits with a committee of nine insurers, elected annually. Alongside them sit nonvoting members representing insurance agents, brokers, surplus line brokers and the public, each appointed by the Governor. Since October 2025 the Speaker of the Assembly and the chair of the Senate Rules Committee also serve as nonvoting ex officio members.

The Insurance Commissioner approves the plan of operation and can revoke that approval or impose one, supervises and examines the association, and must approve any assessment of members. Rates go through the same prior approval process as any other California property insurer. That structure matters later in this story, because it determines who pays when the plan runs short.

And it was explicitly temporary. The plan’s architects believed it would be a short-term measure to stabilize urban markets until private insurers returned. It has now operated continuously for nearly sixty years.

The first shift: brush fire regions

Through the 1970s and 1980s, the FAIR Plan served its original urban population while quietly expanding into a second category, what the Assembly Insurance Committee’s background paper describes as “designated” brush fire regions. California’s foothill and canyon communities had always had limited insurance access, and the plan began to cover them alongside its urban book.

The two populations coexisted. South Central Los Angeles and Malibu Canyon, both on the same plan, for overlapping but distinct reasons.

The Oakland Hills Fire of October 19 and 20, 1991 destroyed 2,843 single-family homes and 437 apartment and condominium units, and killed 25 people in the East Bay hills. FEMA called it America’s most costly urban-wildland fire.

It did not trigger a FAIR Plan assessment. What it did was accelerate awareness inside the industry that wildfire in wildland-urban interface communities was a serious accumulation risk. It did not restructure the plan.

What turned the FAIR Plan into a statewide program?

The Northridge earthquake of January 1994. It produced an estimated $20 billion in insured losses and revealed to private insurers that California’s aggregate earthquake exposure was far larger than their models had suggested. The industry pulled back from California homeowners coverage broadly, and the state’s response included expanding the FAIR Plan to cover the entire state rather than only urban areas and designated brush zones.

That is the structural inflection point in the plan’s history, and it is worth understanding in detail.

The Northridge earthquake did not primarily destroy homes through fire. What it destroyed was the industry’s confidence in its own California math. Carriers withdrew from homeowners coverage generally, earthquake and non-earthquake alike, because in California the two were sold together. Escrows began failing because buyers could not obtain property insurance. The market was near collapse.

The response had two components, one legislative and one administrative. The Legislature created the California Earthquake Authority to provide a separate mechanism for earthquake coverage, allowing private carriers to shed that exposure from their books. And the Insurance Commissioner expanded the FAIR Plan to statewide coverage, removing the prior geographic limitations and making the entire state FAIR Plan territory.

That 1994 to 1995 expansion transformed the program from a geographically targeted mechanism into a statewide last resort. The wildfire exposure that would eventually dominate the plan’s book was now eligible, not merely by policy design but by the full geographic scope of the program. Nobody framed it that way at the time. The stated problem was earthquake, and the solution to earthquake quietly opened the door to fire.

The wildfire era

The FAIR Plan carried 126,709 policies in 2018, and the number had not changed dramatically in years.

Then the fires came.

The Thomas Fire burned 282,000 acres across Ventura and Santa Barbara Counties in December 2017. The Tubbs Fire destroyed more than 5,600 structures in Napa and Sonoma Counties the same year, most of them in Santa Rosa.

On November 8, 2018, two fires started the same day. The Camp Fire killed 85 people and destroyed nearly the entire town of Paradise. The Woolsey Fire ignited in the Simi Hills, burned southwest across the Santa Monica Mountains into Malibu, and reached the western edge of the San Fernando Valley.

The Dixie Fire, in 2021, burned 963,000 acres to become the largest single wildfire in California history. Only the 2020 August Complex burned more, and that was a set of separate lightning fires fought as one incident.

Each of these events produced the same sequence. Private insurers absorbed large losses. They recalculated the risk profile of the communities involved. And they declined to renew policies.

The structural problem was California’s rate regulation framework, and the detail here is more specific than it usually gets described. Proposition 103, passed by voters in 1988, required prior approval of rate changes. The regulations adopted under it went further, prohibiting insurers from using forward-looking catastrophe models in rate filings and from including the cost of reinsurance. California was the only state in the country that barred both.

That distinction between the initiative and its implementing regulations matters more than it sounds, and it explains what happened later. Because the two prohibitions lived in regulation rather than in the text of Proposition 103 itself, the Insurance Commissioner could eventually undo them without going back to the ballot.

In the meantime, the math did not work. Reinsurance costs nearly doubled between 2017 and 2023, including a 35 percent jump in 2023 alone, and California carriers had no regulatory mechanism to pass those costs through. The choice was to write policies at rates they considered inadequate, accumulate losses, and eventually leave, or to stop writing new business and selectively non-renew. Many chose to leave.

Between 2022 and 2024 the largest names in California homeowners insurance pulled back in sequence. Allstate stopped writing new homeowners and condominium policies in November 2022. State Farm General stopped accepting new applications in May 2023 and later non-renewed roughly 72,000 policies. Farmers capped new homeowners business rather than halting it, a cap it did not lift until November 2025. Smaller carriers left outright, one of them citing an inability to obtain reinsurance.

By September 2023 the Department of Insurance counted seven of California’s twelve largest homeowners groups, together about 85 percent of the market, as having paused or restricted new business. We wrote separately about how the homeowners market fell into crisis and what is being done about it.

The FAIR Plan absorbed the displaced policyholders. Enrollment rose to 160,302 in 2019, then kept climbing through every fire season that followed. By December 2024 the plan carried 516,313 policies. By June 2026, 696,562. Total exposure reached $768 billion, an increase of roughly 250 percent since September 2022. In the highest wildfire-risk ZIP codes, roughly 41 percent of residential structures are now insured through the FAIR Plan, against about 4 percent in lower-risk areas.

January 2025

The FAIR Plan entered January 2025 with a cash position measured in the low hundreds of millions of dollars, against a book carrying hundreds of billions in exposure.

The fires ultimately produced roughly $4 billion in FAIR Plan losses, an order of magnitude beyond the cash on hand. The reinsurance program in force that year was designed for events up to a 1-in-102-year severity and carried a $900 million retention before reinsurance triggered. The January fires came close to exhausting the plan’s entire annual reinsurance capacity in a single event.

The gap between those reserve levels and the scale of the loss is not simply a product of the January 2025 fires. It reflects three decades of accumulated exposure without a matching build of financial resilience.

From 1995 to 2025, the FAIR Plan operated without a major assessment. That thirty-year quiet produced something the plan’s architects never intended: a widespread assumption of financial stability. Enrollment tripled and insured values climbed roughly fifteenfold in seven years. The reserve base grew far more slowly, constrained by the regulatory difficulty of raising rates in a market where policyholders had nowhere else to go. The January fires exposed what the quiet had obscured.

On February 11, 2025, Insurance Commissioner Ricardo Lara signed Order No. 2025-1, authorizing a $1 billion emergency assessment.

Before that, the plan had assessed its members only three times in its entire history. The FAIR Plan’s own accounting puts them at $150 million in 1993, $60 million in 1994, and $50 million in 1995, roughly $260 million in total, with the 1994 and 1995 actions driven by Northridge. The 1993 assessment came after two fires that autumn: Kinneloa, which burned above Altadena, and Old Topanga, which ran through Topanga and Malibu. Thirty-two years later the same Altadena hillsides burned again, and the plan reached for the same mechanism at four times the scale.

Can a FAIR Plan assessment show up on your insurance bill?

Yes. Under regulations issued in 2025, insurers may recover up to 50 percent of their assessment share, up to $500 million in aggregate, through a temporary surcharge on their own policyholders. That recovery requires Insurance Commissioner approval under Proposition 103, but once approved it reaches ordinary policyholders.

So a homeowner insured with a private carrier, living nowhere near the Palisades or the Eaton fire, can find a line item on a renewal bill. It covers losses from a fire they never filed a claim on.

This is not a defect in the mechanism. It is precisely how the plan was designed to work. All insurers fund the losses, and some portion of that cost flows through to all policyholders. The program conceived to protect small business owners in Watts from insurance redlining had become a financial institution carrying $768 billion in exposure, and one requiring a billion-dollar emergency capital call to avoid insolvency.

The plan has since moved to pre-fund more of that tail exposure in the capital markets. In December 2025 it issued its first catastrophe bond, a $750 million placement through its Golden Bear Re program and the largest wildfire catastrophe bond ever brought to market. A further $400 million tranche followed in 2026. It also raised its reinsurance retention to $1.25 billion.

A companion article, “Who Pays When the FAIR Plan Runs Out?”, takes up the full mechanics. How the reinsurance stack works, what triggers an assessment, and what the law does and does not say about what happens if those mechanisms prove insufficient.

The Sustainable Insurance Strategy

Commissioner Lara’s Sustainable Insurance Strategy, announced in September 2023, represented the most significant regulatory change to California’s insurance framework since Proposition 103.

The core bargain: carriers that write homeowners insurance in California must commit to writing meaningful coverage in wildfire-distressed areas, at least 85 percent of their statewide market share in those communities. In exchange, the department would allow two things California had prohibited for decades. Carriers could use forward-looking probabilistic catastrophe models in rate filings. And they could include their net California reinsurance costs, under a regulation issued at the end of December 2024.

Verisk became the first modeler to complete the department’s review process for a wildfire catastrophe model, in July 2025. Insurers began filing new rates under the reformed framework, some of them in the non-admitted market that has absorbed much of the risk the admitted market will not take.

Whether this brings carriers back in meaningful numbers, or primarily produces substantial rate increases for existing policyholders, remains an open question. The reforms address the structural reasons carriers left. They do not reduce the underlying wildfire risk that drove the math in the first place.

What does the FAIR Plan cover, and what does it not?

One of the most important practical facts about the FAIR Plan is poorly understood by many of the homeowners who carry it.

A FAIR Plan policy is a named-perils form built around fire, lightning, internal explosion and smoke, with windstorm and several other causes available when extended coverage is added. It does not cover personal liability, theft, water damage from burst pipes or appliances, flood or earthquake.

Loss of use works differently rather than being absent. The form provides Fair Rental Value, measured as what the dwelling could be rented for rather than reimbursing what you actually spend. Where it is not scheduled with its own limit, electing it draws down the dwelling limit itself. Two further features catch people out. Replacement cost is not automatic on an older house, and without it a total loss settles at market value rather than rebuilding cost. Our guide to the FAIR Plan sets those out in detail.

A homeowner carrying only a FAIR Plan policy has fire coverage and not much else.

Why a difference in conditions policy is needed alongside it

Comprehensive protection requires pairing the FAIR Plan with a difference in conditions policy from the private market: two separate policies, two separate carriers, two separate claims processes. The FAIR Plan says so itself, stating plainly on its own site that it does not offer DIC policies. The DIC market exists, but it adds cost and complexity, and it has to be arranged separately through a broker. We set out how the FAIR Plan and DIC fit together in more practical detail.

That division is not about to change on its own. In December 2025 the Court of Appeal held that the FAIR Plan is not required to offer expanded liability coverage, reversing the Department of Insurance. Whatever closes this gap will have to come from the Legislature.

Many homeowners on the FAIR Plan carry it as their only policy, believing they are protected when large parts of the risk sit outside it. This gap is one of the most consequential underinsurance problems in California, and it stays invisible until a claim is filed.

California legislators are attempting to close it directly. Assembly Bill 1680, the Make It FAIR Act, was introduced in February 2026 by Assemblymember Lisa Calderon, chair of the Assembly Insurance Committee, and sponsored by Insurance Commissioner Lara. It would give the Commissioner authority to require the FAIR Plan to offer a comprehensive homeowners option, addressing the very gap that forces policyholders to buy a separate DIC wrap today.

The bill grew out of a Department of Insurance report of examination finding that the FAIR Plan had not fully addressed 17 of 32 recommendations covering financial condition, corporate governance, and consumer protections. It would also require added staffing, a multi-year strategic plan, and faster routes back to the standard market. It would open Governing Committee meetings and records to the public. As amended, it carries a $20,000 penalty for failing to act on examination findings.

It passed the Assembly on May 21, 2026 by a vote of 62 to 8, cleared the Senate Insurance Committee 6 to 0 in June, and came off the Senate Appropriations suspense file on a 7 to 0 vote in August. It was amended on the Senate floor on August 19 and ordered to third reading the following day.

It passed the Senate 39 to 0 on August 31, 2026, the last day of the session, and the Assembly concurred in the Senate amendments the same day, 72 to 1. The enrolled bill went to the Governor, who has until September 30, 2026 to sign or veto it. As of September 5, 2026 it is not yet law.

The Make It FAIR Act should not be confused with the ballot initiative that would have repealed Proposition 103. That measure was withdrawn in December 2025, alongside a competing consumer-side measure, in what amounted to a mutual stand-down.

One recent development worth knowing: the FAIR Plan overhauled its wildfire hardening discount program effective November 15, 2025. Policyholders can now qualify for as many as twelve separate discounts, applied to the wildfire portion of the premium. A Dwelling Fire policyholder qualifying for all of them may see up to 16.4 percent off that portion. Credits are available for measures including the IBHS Wildfire Prepared Home designation. For homeowners in high-risk areas, mitigation can reduce cost now and improve insurability later as the market reforms work through.

Cost is moving in the other direction as well. The Department of Insurance approved a 29.1 percent average statewide rate increase for the FAIR Plan, below the 35.8 percent originally requested. It takes effect October 15, 2026 on new and renewal business, weighted heavily toward the wildfire portion of the premium, with some lower-risk urban policyholders seeing decreases.

Where does this leave California homeowners?

The California FAIR Plan has run for nearly six decades and traveled from one crisis into another it was never designed for.

Its intended beneficiaries were the urban property owners of 1968: the small businesses of Watts and East Oakland that could not buy insurance because of where they stood. They were beneficiaries only in the sense that nobody expected them to need the plan for long.

The plan is now the primary insurance mechanism for hundreds of thousands of California homeowners in fire-prone communities. It carries ten times the exposure of any catastrophe scenario its architects imagined. Its first major financial stress test in thirty years left it requiring emergency capital from the broader insurance market.

Two questions will play out over the next several years. Whether the current reform effort stabilizes the private homeowners market. And whether the FAIR Plan returns to something closer to its intended role as a backstop rather than a primary market.

What is already clear is simpler. The program has been asked to absorb a risk that was never part of its design, and the design is showing the strain.

If you hold a FAIR Plan policy, two things are worth checking on your own declarations page: whether dwelling replacement cost is on it, and what the Fair Rental Value limit actually is. Those two decide most of what happens after a fire. We can read them with you and tell you whether a difference in conditions policy alongside it is closing the gaps you think it is.

Call the Granada Hills office at 818-322-4744 or request a review. Be insurance wise.

Sources

• California FAIR Plan Association, Key Statistics and Data
• California Department of Insurance, Order No. 2025-1 and the accompanying announcement, February 11, 2025
• California Assembly Insurance Committee, FAIR Plan informational hearing background
• Federal Reserve Bank of Chicago, Chicago Fed Letter No. 484, September 2023
• Bench Ansfield, CalMatters commentary, October 2025
• California Department of Insurance, Sustainable Insurance Strategy
• CAL FIRE, Top 20 Largest, Most Destructive and Deadliest California Wildfires
• California Legislature, AB 1680 (Calderon), the Make It FAIR Act, status current to September 5, 2026

Disclaimer

This article is provided by Schneiderman Insurance Agency for general informational purposes only. It is not legal, tax, financial, claims, or coverage advice. We are licensed insurance professionals, not attorneys, accountants, or financial advisors, and nothing here should be relied on as a substitute for advice from a qualified professional in those fields. This content is general in nature and is not a review of, or a recommendation for, any individual reader’s specific insurance needs, policies, or circumstances. Insurance coverage depends entirely on the specific terms, conditions, endorsements, exclusions, limits, underwriting eligibility, carrier, and facts of each situation, and the actual policy language always controls. We do not guarantee any coverage, pricing, eligibility, underwriting approval, or claim outcome. Reading this article does not create an agent-client relationship. To understand how these issues apply to your situation, please review your own policy and speak with a licensed insurance professional, and consult legal, tax, or financial advisors where appropriate. Figures reflect research current to August 2026.