The California FAIR Plan was never supposed to be this big. Created as a temporary insurer of last resort for homeowners who couldn't find coverage in the private market, the program was designed to be a small backstop—not a primary insurer for hundreds of thousands of California families.

But one year after the devastating January 2025 Los Angeles wildfires, the FAIR Plan has grown into something its architects never imagined: the default option for a growing share of Californians living in fire-prone areas, with all the risks and costs that entails.

The Numbers Tell the Story

The FAIR Plan now insures more than 600,000 homes—up nearly 170% since 2021. The growth has been relentless, accelerating as private insurers have either exited California entirely or dramatically reduced their exposure to wildfire-prone areas.

The January 2025 fires, which killed at least 31 people and destroyed more than 16,000 buildings across Los Angeles and Ventura counties, pushed the system to its limits. The FAIR Plan reported an estimated $4 billion in losses from the Palisades and Eaton fires alone.

"We're seeing huge gaps between the money insurance is paying out, to the extent we have insurance, and what it will actually cost to rebuild and/or remediate our homes."

— Joy Chen, Executive Director, Eaton Fire Survivors Network

Those losses triggered a $1 billion assessment on private insurers—costs that are ultimately passed through to policyholders across the state in the form of higher premiums.

The Satisfaction Gap

Survey data paints a troubling picture of FAIR Plan performance during the crisis. Customers of State Farm and the FAIR Plan—the two largest insurers of fire-affected properties—were the most dissatisfied with their insurers' response to the January 2025 fires.

California's Department of Insurance has opened investigations into both entities. The state has taken legal action against the FAIR Plan over its handling of claims, particularly those involving smoke damage that didn't involve direct fire contact with structures.

By December 2025, less than 20% of people who experienced total home loss had closed out their insurance claims—a pace that has left thousands of families in limbo, unable to begin rebuilding while disputes over coverage amounts drag on.

Why Private Insurers Are Fleeing

The FAIR Plan's growth is a symptom of a deeper problem: the private insurance market's retreat from California wildfire zones. The math has simply become unworkable for many insurers.

Consider the replacement cost data from the January fires: the average estimated replacement cost for homes in the Palisades fire area was $955,000—66% higher than the $574,000 average for the Eaton fire zone. When losses of this magnitude become increasingly frequent, traditional insurance models break down.

Private insurers have responded by:

  • Refusing to renew policies in designated high-risk zones
  • Dramatically increasing premiums where they continue to offer coverage
  • Tightening underwriting standards to exclude properties near vegetation
  • In some cases, withdrawing from California entirely

The result is a vicious cycle: as private insurers retreat, more homeowners are pushed into the FAIR Plan, concentrating risk in a program with limited ability to manage it.

The Taxpayer and Ratepayer Burden

When the FAIR Plan incurs losses beyond its reserves, it assesses the private insurance industry. Those assessments—like the $1 billion triggered by the January 2025 fires—are ultimately passed on to policyholders statewide through premium increases.

In essence, every California insurance policyholder is now subsidizing the FAIR Plan's growing exposure to wildfire-prone properties. This hidden cost is driving up insurance prices even in areas far removed from fire risk.

California lawmakers recognized the problem and agreed in September 2025 to boost the state's $21 billion wildfire insurance fund by $18 billion. The cost will be split evenly between utility shareholders and electric ratepayers—another burden on California households.

New Laws Aim to Stabilize the Market

Beginning January 1, 2026, nine new laws sponsored by Insurance Commissioner Ricardo Lara went into effect, attempting to address the crisis:

  • The FAIR Plan Stability Act (AB 226): Allows the FAIR Plan to access catastrophic bonds and credit lines, providing additional financial resources to handle large losses
  • The Business Insurance Protection Act (SB 547): Extends moratorium protections to commercial policies, covering businesses, HOAs, condominiums, and non-profits in fire-affected areas
  • Moratorium Extensions: Commissioner Lara issued Bulletin 2025-17 enforcing a one-year mandatory moratorium on residential property insurance cancellations in wildfire-affected ZIP codes

These measures provide temporary relief but don't address the fundamental problem: California's wildfire risk exceeds the private insurance market's appetite to bear it.

The Rebuilding Reality

One year after the January 2025 fires, fewer than a dozen homes have been fully rebuilt in Los Angeles County. City and county officials have issued more than 2,600 building permits, and in Pacific Palisades, more than 400 rebuilds were under construction at the start of 2026, with nearly 1,300 additional projects in planning.

But the numbers also reveal who is choosing not to return: only 25% to 30% of residents plan to rebuild. For many, the combination of insurance disputes, increased construction costs, and the fear of future fires has made leaving more attractive than staying.

Seven in 10 L.A. fire survivors have yet to return home, some in part because of ongoing insurance claim delays. The psychological and financial toll on these families continues to mount.

What Comes Next

The FAIR Plan's unsustainable growth points to the need for fundamental reform of California's approach to wildfire risk. Possible solutions being discussed include:

  • Mandatory disclosure: Requiring home sellers to disclose wildfire risk and insurance costs
  • Land-use restrictions: Limiting new construction in the highest-risk zones
  • Hardening incentives: Providing premium discounts for fire-resistant construction and vegetation management
  • Public insurance option: Creating a state-backed insurer that could spread risk more broadly

None of these solutions is simple or politically easy. But the status quo—a FAIR Plan designed as a temporary backstop that is instead becoming California's largest residential insurer in fire-prone areas—is not sustainable.

For the 600,000 California families now relying on the FAIR Plan, the stakes couldn't be higher. They've become participants in an experiment in public insurance that was never designed for this scale—and whose long-term viability remains very much in question.