Since those devastating fires hit Los Angeles earlier this year, there’s been a ton of chatter about rate hikes and even a possible statewide assessment, because the California Fair Plan just doesn’t have enough reserves to cover everything.
What’s the Shortfall?
So here’s the deal: after two separate Southern California fires, losses tied strictly to the California Fair Plan are hovering around $4 billion. But at the time, the Fair Plan only had a bit over $3 billion in cash reserves and reinsurance. That leaves almost $1 billion unaccounted for—basically, who’s left holding the bag?
How We Bridge That Billion-Dollar Gap
Last year, the Insurance Commissioner put new rules in place: if the Fair Plan ever faces insolvency, they can assess every admitted insurer in California. That means State Farm, AAA, Nationwide, Travelers, and all the rest will chip in to cover that shortfall. Then—and this is key—those carriers can pass up to 50% of that assessment onto policyholders through a separate line item on your renewal bill.
What Your Renewal Might Look Like
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Timing: Expect to see the “Assessment” charge show up on your next renewal, probably within the next 12 months.
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Amount: It could be a few hundred dollars… or maybe closer to $1,000, depending on how much business each carrier wrote in California.
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Visibility: By regulation, it must be clearly outlined on top of your normal premium—no hiding it in the fine print.
Rate Increases Beyond the Assessment
And yeah, beyond the assessment, everyone’s wondering about overall rate hikes. Wildfires have become our “new normal,” with catastrophic events costing tens of thousands of homes almost every year. That means:
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Modest-to-moderate premium increases across most areas—hopefully not as dramatic as the spikes of the last couple years, but still noticeable.
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Higher hikes in both urban zones hit by these fires and in high-brush wildfire corridors.
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Carriers balancing profit goals with charging rates that actually reflect the true risk they’re underwriting.
What You Can Do Right Now
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Review your coverage. Make sure your limits and deductibles still make sense.
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Ask about wildfire credits. Have you cleared brush or installed ember-resistant vents? You might snag a discount.
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Shop around. As carriers adjust rates, you may find more competitive options, especially if you’re in a lower-risk area.
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Budget for the assessment. Factor in an extra few hundred dollars so you’re not caught off guard at renewal.
…please reach out! Shoot us an email or give us a call, and we’ll walk you through your options. Together, we’ll make sure you stay protected in these increasingly unpredictable times.
