California homeowners will soon pay surcharges averaging $50 to help major insurers recover losses from January’s devastating Los Angeles County wildfires, which caused nearly $4 billion in residential and commercial damage.
How the surcharges work
The California FAIR Plan Association, the state’s insurer of last resort, was overwhelmed by claims after the Palisades and Eaton fires destroyed nearly 13,000 homes. To fund those payouts, the plan issued a $1 billion assessment to its member insurers in February 2025. Regulators have now approved requests from carriers such as State Farm General, Farmers and Mercury to recover about half of those costs directly from customers.
For standard homeowners, the charge amounts to about 1% of their annual premium, roughly $50 on average, spread across two renewal periods. Renters and condo owners will pay smaller one-time surcharges. Collectively, residential policyholders could contribute several hundred million dollars statewide.
Legal and political backlash
Consumer Watchdog, a Los Angeles-based advocacy group, has sued Insurance Commissioner Ricardo Lara, arguing that the policyholder surcharge is an illegal “industry bailout” enacted without proper rule-making. The Department of Insurance maintains the regulation is necessary to stabilize the market and keep coverage available after a record rise in FAIR Plan enrollment—up 169% since 2021 as private insurers retreat from fire-prone zones.
Broader Context
The FAIR Plan was created in 1968 to provide basic fire coverage when insurers withdrew from high-risk areas. This latest crisis highlights how climate-driven catastrophes are destabilizing California’s insurance market, forcing regulators to balance affordability with solvency. The FAIR Plan has since requested a 36% rate increase while continuing to face lawsuits over claim denials and alleged underpayments tied to smoke damage from the 2025 fires.
Source: Los Angeles Times
