California tries to bolster state insurance plan in bill package

SACRAMENTO, Calif. (CN) — California Governor Gavin Newsom signed a series of bills Thursday that target improvements to the state’s insurance of last resort.

Officials intended the Fair Access to Insurance Requirements Plan, or FAIR Plan, to serve as someone’s last choice for insurance. However, over recent years it’s increasingly become the only insurance people can obtain as policy costs have ballooned.

Five bills signed by Newsom seek to address that problem. Newsom’s office said they will bolster the FAIR Plan with new financing methods, heighten oversight and add coverage for manufactured homes, among other moves.

“The kinds of climate-fueled firestorms like we saw in January will only continue to worsen over time,” the governor said in a statement. “That’s why we’re taking action now to continue strengthening California’s insurance market to be more resilient in the face of the climate crisis.”

One of the bills — Assembly Bill 226, by Assemblymember Lisa Calderon, a Whittier Democrat — is called the FAIR Plan Stabilization Act. It gives the California Infrastructure and Economic Development Bank, when requested to by the plan, the ability to issue bonds. Those bonds can finance claim costs, increase liquidity as well as the capacity of the plan to pay claims.

“The FAIR Plan does not currently have statute allowing them to use the financial tools included in this measure,” Calderson said in a bill analysis. “AB 226 increases the financial tools available to offset the increased exposure to the FAIR Plan.”

Assembly Bill 290 requires the plan to create a system for accepting automatic payments for policyholders by April 1. It also prohibits plan cancellations or non-renewals because someone isn’t enrolled in automatic payments, as well as giving policyholders 10 days to pay an outstanding installment.

The bill’s author — Assemblymember Rebecca Bauer-Kahan, an Orinda Democrat — has said the changes were needed to protect people from unintentional coverage lapses.

State Senator Brian Jones, a San Diego Republican, wrote Senate Bill 525. It clarifies that the FAIR Plan covers manufactured, or mobile, homes.

Jones has said manufactured homeowners don’t get the same full replacement cost coverage as other homeowners, and instead only receive coverage based on a home’s initial purchase price. That leaves them significantly underinsured.

The final two bills offer tweaks to the plan’s regulations and its board’s composition.

Assembly Bill 1 — by Assemblymember Damon Connolly, a San Rafael Democrat — will require the state’s insurance department to consider every five years whether to update its Safer from Wildfires regulations. Considerations must include if more building-hardening measures are needed to strengthen mitigation on the individual level and for communitywide programs.

The department must have its first look at the regulations by Jan. 1, 2030.

“I believe introducing regular checkpoints for reviewing and updating these regulations would ensure that these regulations stay current with the latest fire safety research and collected data, while continuing long-standing interagency coordination as it relates to sharing and coordinating wildfire knowledge and data,” said Insurance Commissioner Ricardo Lara in a bill analysis.

The final legislative piece — Assembly Bill 234, by Calderon — requires the Assembly speaker and state Senate Rules Committee chair, or their designee, to serve as nonvoting, ex officio members of the plan’s governing committee.

The Consumer Federation of California previously had blasted the move. It said the FAIR Plan needs more transparency. Adding two non-voting members will do nothing to solve that problem.

Changes to the FAIR Plan have been in the works for years.

Newsom in 2023 issued an executive order urging Lara to move quickly to deal with an insurance market hammered by climate change. He sought to increase coverage options for people while keeping consumer protections and making plans affordable.

The governor also signed an unrelated bill Thursday related to cats. Assembly Bill 867 — written by Assemblymember Alex Lee, a Milpitas Democrat — bans cat declawing, unless medically necessary.

“AB 867 shows the nation and world that California does not endorse surgical mutilation performed electively on healthy cats for human convenience,” Lee said in a bill analysis.