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 today know it as the insurer of last resort for homeowners in fire-prone communities, the backstop when no private carrier will write your policy. That understanding is not wrong, but it is incomplete. Understanding where the FAIR 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 the current crisis is really about. That history has been drawn out most clearly by the historian Bench Ansfield of Temple University, whose commentary for CalMatters traced the plan back to the Watts uprising rather than to wildfire. The account below follows 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 across a 46-square-mile area. 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 concluded that the neighborhoods of South Central Los Angeles were too risky to cover. They canceled policies, refused to renew others, and sharply raised premiums for any property owner who could still find a carrier willing to write them. For small business owners in Watts, the pharmacists, the grocers, the hardware store owners trying to rebuild, insurance became nearly impossible to obtain at any reasonable price.
This pattern was not new. Insurers had long engaged in what was known internally as “redlining”: the practice of refusing to write coverage in neighborhoods designated as high-risk, using ZIP codes or street boundaries as proxies for race. Agent testimony before federal investigators documented the practice plainly: certain areas were simply “K.O. areas” or “redline districts.” The 1938 FHA Underwriting Manual had codified similar geographic exclusions under federal housing policy, and the insurance industry had adopted its own parallel version. Research published by the Federal Reserve Bank of Chicago, in Chicago Fed Letter No. 484 of September 2023, traced the near-perfect geographic alignment between FAIR Plan coverage gaps and the Home Owners’ Loan Corporation redlining maps of the 1930s. These were boundaries of insurance exclusion that had changed remarkably little in four decades, drawn by different institutions for nominally different reasons.
Watts brought it 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 February 1968 report warned that “our nation is moving toward two societies, one Black, one White — 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 made the urban insurance problem a national emergency.
The Hughes Panel’s report, published January 27, 1968, was unambiguous: private insurers were systematically withdrawing from urban areas, and this withdrawal was accelerating the physical deterioration and economic abandonment of those communities. The panel’s recommendation was a federal-state partnership that would require states to provide property insurance “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 same August, codified at California Insurance Code section 10090.
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. It had no liability coverage, no theft protection, no additional living expense coverage if a home became uninhabitable. Policyholders who wanted broader coverage had to purchase a separate “Difference in Conditions” policy from the private market. The FAIR Plan covered the named perils. A DIC policy filled in the gaps. Together, the two were supposed to approximate a full homeowners policy, but they required two separate transactions, two separate carriers, and two separate 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: “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, but the program’s original population was commercial.
It was mandatory, but it was not a government agency. 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 of the FAIR Plan association. Losses are shared proportionally to each member’s share of the California market. The plan is governed by a board that includes both industry representatives and public members appointed by the Insurance Commissioner. The California Department of Insurance approves rates, policy forms, and any assessments. It is a private institution operating under state regulatory oversight, and it receives no taxpayer funding.
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: “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 1991 destroyed more than 3,000 homes and killed 25 people in the East Bay hills. It was the most destructive urban fire in American history at that point. It produced an early FAIR Plan assessment in 1993, and it accelerated awareness inside the industry that wildfire in wildland-urban interface communities was a serious accumulation risk. But the 1991 fire did not fundamentally restructure the plan.
What restructured it was the Northridge earthquake of January 1994.
The Northridge earthquake produced an estimated $20 billion in insured losses. It did not primarily destroy homes through fire, but it revealed to private insurers that California’s aggregate earthquake exposure was catastrophically larger than their models had suggested. The industry response was to pull back broadly from California homeowners coverage, earthquake and non-earthquake alike. Escrows began failing because buyers could not obtain property insurance. The market was near collapse.
The administrative and legislative response had two components. The California 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 FAIR Plan was expanded to statewide coverage, removing the prior geographic limitations to urban areas and designated brush zones and making the entire state FAIR Plan territory.
That 1994-1995 statewide expansion is the structural inflection point in the FAIR Plan’s history. It 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 just by policy design, but by the full geographic scope of the program.
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 in Ventura and Santa Barbara Counties in December 2017. The Tubbs Fire destroyed more than 5,600 structures in Sonoma County the same year. In November 2018, the Camp Fire killed 85 people and destroyed nearly the entire town of Paradise. The Woolsey Fire burned through Malibu and the western San Fernando Valley the same week. The Dixie Fire, in 2021, became the largest single fire in California history at 963,000 acres.
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. Proposition 103, passed by voters in 1988, required prior approval of rate changes and prohibited insurers from using forward-looking catastrophe models in rate filings. It also prohibited the inclusion of reinsurance costs. As wildfire reinsurance costs more than doubled nationally between 2017 and 2023 (including a 35 percent increase in a single year) California carriers had no regulatory mechanism to pass those costs through to policyholders. The choice was to write policies at inadequately priced rates, accumulate losses, and eventually leave, or to stop writing new policies and selectively non-renew existing ones. Many chose to leave.
Allstate paused all new California homeowners policies in November 2022. State Farm stopped accepting new applications statewide in May 2023 and then announced the non-renewal of 72,000 existing policies in 2024. Farmers capped new policies and then withdrew one of its subsidiary carriers entirely. Tokio Marine, Falls Lake, AmGUARD, Nationwide, and others followed. By early 2024, seven of California’s twelve largest homeowners insurers had paused or restricted new business.
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 an estimated $4.1 billion in FAIR Plan losses, an order of magnitude beyond the cash on hand. The plan’s reinsurance program, designed for events up to a 1-in-102-year severity, had 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 commensurate build of financial resilience. From 1994-1995 to 2025, the FAIR Plan operated without a major assessment. That thirty-year gap had produced something the plan’s architects never intended: a widespread assumption of financial stability. While enrollment tripled and insured values climbed 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 no other options. The January fires exposed what that gap had obscured.
On February 11, 2025, Insurance Commissioner Ricardo Lara signed Order No. 2025-1, authorizing a $1 billion emergency assessment. The Assembly Insurance Committee records only three assessments in the plan’s history, the previous ones falling between 1993 and 1995 and totaling roughly $260 million, driven notably by the Northridge earthquake. The 1993 action followed the Kinneloa Fire in Altadena and the Old Topanga Fire in Malibu and Topanga. Thirty-two years later, the same Altadena hillsides burned again. Every admitted property and casualty insurer in California received a bill, allocated by market share. For the first time in thirty years, the mechanism that the FAIR Plan’s architects had built was triggered at scale.
Under regulations issued in 2025, insurers may recover up to 50 percent of their assessment share (up to $500 million in aggregate) by imposing a temporary surcharge on their own policyholders. Subject to Insurance Commissioner approval under Proposition 103, that cost can reach an ordinary policyholder. A homeowner insured with a private carrier, living nowhere near the Palisades or Eaton fire, can see a line item on a renewal bill covering 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; some portion of that cost flows through to all policyholders.
The program conceived to protect small business owners in Watts from insurance redlining had, by 2025, become a financial institution carrying $750 billion in exposure and requiring a nine-figure emergency capital call to avoid insolvency.
The plan has also begun pre-funding part of its tail exposure in the capital markets, issuing catastrophe bonds through its Golden Bear Re program, with a further tranche in 2026. A companion article, “Who Pays When the FAIR Plan Runs Out?”, examines the full mechanics. It covers how the reinsurance stack works, what triggers an assessment, and what the law currently 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 that California had prohibited for decades. Carriers could use forward-looking probabilistic catastrophe models in rate filings, beginning December 2024. And they could include their net California reinsurance costs in rate filings, beginning at the end of 2024. California had been the only state in the country that prohibited both.
The first approved catastrophe model, from Verisk, completed regulatory review in July 2025. Insurers began filing new rates under the reformed framework. Whether this brings carriers back to the California market in meaningful numbers, or primarily results in 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 the FAIR Plan covers, and what it does 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 covers fire, smoke, wind, and a small list of other named perils. It does not cover personal liability, theft, water damage from burst pipes or appliances, flood, earthquake, or additional living expenses if your home becomes uninhabitable after a loss. A homeowner who carries only a FAIR Plan policy has basic fire coverage and not much else.
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 DIC market exists, but it adds cost and complexity. Many homeowners on the FAIR Plan carry it as their only policy, believing they are protected when large parts of the risk sit outside the policy. This gap is one of the most consequential underinsurance problems in California, and it is largely invisible until a claim is filed.
California legislators are attempting to close that gap 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 that found the FAIR Plan had failed to comply with seventeen recommendations covering financial condition, corporate governance, and consumer protections. It would also require added staffing, a multi-year strategic plan, faster routes back to the standard market, and public access to Governing Committee meetings and records. It passed the Assembly in May 2026 and cleared the Senate Insurance Committee in June. Its final form and timing are not settled.
The Make It FAIR Act should not be confused with the California Insurance Market Reform Act of 2026, a separate ballot initiative that would have repealed Proposition 103. That measure was withdrawn in December 2025.
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 FAIR Plan has announced a 29.1 percent rate increase taking effect this fall, below the larger figure it originally sought.
Where this leaves California homeowners
The California FAIR Plan has run for nearly six decades and traveled from one crisis to another one it was never designed for. The urban property owners who relied on it in 1968, the small businesses of Watts and East Oakland who could not buy insurance because of where they lived, were its intended permanent beneficiaries only in the sense that no one expected them to need it 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.
Whether the current reform effort stabilizes the private homeowners market in California, and whether the FAIR Plan returns to something closer to its intended role as a backstop rather than a primary market, will play out over the next several years. What is already clear is that the program has been asked to absorb a risk that was never part of its design, and that the design is showing the strain.
If you have questions about how the California FAIR Plan applies to your property, or whether you need a difference in conditions policy alongside it, our team is here to help. Call the Granada Hills office at 818-322-4744 or request a quote.
This article is for general informational purposes only and is not legal, financial, claims, or coverage advice. Insurance availability, coverage terms, and regulatory requirements change. Figures reflect research current to August 2026. Coverage is governed by the policy form in every case. Please consult a licensed insurance professional about your own situation.
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