From the San Francisco Chronicle, January 10, 2024:
Experts have predicted that the fires blazing through several parts of Los Angeles County could easily become the most costly wildfire event in the U.S. One insurer alone faces potential losses of up to $24 billion: the California FAIR Plan.
The FAIR Plan is a state-created but privately run insurer of last resort, providing fire insurance for residents and businesses unable to secure a policy on the private market. The FAIR Plan is not funded or financially backed by the government — instead, if the FAIR Plan runs out of money to pay claims, it’s private insurers and their customers who end up with the bill.
Experts worry that if the FAIR Plan is overwhelmed, it could both financially strain policyholders across the state and their insurance companies, which could motivate more companies to rethink doing business in California.
But there are several steps before that would happen.
First, the FAIR Plan would have to blow through all of its reserves — a possibility that seems increasingly likely as strong winds continue to spread the uncontrolled fires. Over the summer, FAIR Plan President Victoria Roach disclosed to the Chronicle that the insurer only had about $385 million in unreserved funds available to pay claims.
The large fires of 2024 largely hit areas where the FAIR Plan had relatively small amounts of exposure.
But Los Angeles County is one of the FAIR Plan’s largest areas of exposure in the state. A Chronicle analysis of the insurer’s data found it covers more than $24 billion worth of residential and commercial property within the ZIP codes in and around the fire perimeters as of Thursday afternoon....
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...The FAIR Plan would end up paying that amount only if every single property it insures inside those ZIP codes ends up totally destroyed.
California Insurance Commissioner Ricardo Lara also said Friday that official numbers were not yet available. “Let me be clear, once the fires are brought under control, we will get data directly from the insurance industry and the FAIR Plan about claims filed,” he said at a news conference in Los Angeles. “We are focused on maintaining the FAIR Plan’s financial health while getting people back to the regular market, where they belong.”
If claims exceed reserves, as seems likely, the FAIR Plan would turn to reinsurance — insurance for insurance companies to tap into during catastrophic events such as massive wildfires. The FAIR Plan has not publicly disclosed how much reinsurance it purchases. But a spokesperson told the Chronicle on Wednesday regarding the L.A. event: “The FAIR Plan has payment mechanisms in place, including reinsurance, to ensure all covered claims are paid.”
Were the losses from the fire to be so large that it would overwhelm even the FAIR Plan’s reinsurance, then the insurer would tap into its third source of money: private insurance companies and their policyholders.
When the FAIR Plan runs out of money to pay claims, it’s allowed to split its remaining costs among all of the licensed insurers in the state, with costs allocated according to each company’s market share. The last time that happened was in 1994, when the devastating Northridge earthquake caused an estimated $32 billion in insured property damage adjusted for inflation....
....MUCH MORE
Here is some of the FAIR PLAN's exposure:
In Pacific Palisades alone the government PLAN's exposure is twice its total reserves and reinsurance.
https://www.cfpnet.com/key-statistics-data/
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Here's a photo of part of one neighborhood that Bloomberg is using as their graphic for January 10's "Paradise Destroyed: Fire Razes LA Enclave Bigger Than Manhattan":
Meanwhile, up north:
3.9-magnitude earthquake shakes Oakland, East Bay
