From Watts to L.A. wildfires: The rise of California's troubled FAIR Plan

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Set us as preferred As leading insurers have retreated from California, one carrier has stepped in to fill the gap.The state’s insurer of last resort, known as the FAIR Plan, has ballooned in size since 2019, after a series of devastating wildfires and escalating reinsurance costs led to mass cancellations of insurance policies across the state.The FAIR Plan provides only basic fire coverage — without the theft, liability or water damage protection that comes under conventional property insurance.As of June 30, the association insured 696,000 properties, with potential losses of $788 billion.

Business As insurers withdrew from the L.A.market, more homeowners joined the FAIR Plan.

Now Jan.7 fire victims are battling with the state’s insurer of last resort to get compensated.The state risk pool was never intended to bear such risk.

It was created by the California Legislature in 1968 after the 1965 Watts riots in Los Angeles, ostensibly to curb redlining by banks, home sellers and insurers in minority neighborhoods.But news accounts show the seeds for the FAIR Plan were planted years before in the 1961 Bel-Air fire that destroyed nearly 500 homes in the Santa Monica Mountains, including those of several Hollywood celebrities.By July 1968, as 2,300 homeowners in the area stood to lose their brush fire coverage, the state Legislature rushed emergency legislation to create the California FAIR Plan Assn.The measure was pushed through so quickly that legislative committees voted only on a skeletal outline.

Details of how to run the syndicate were left to its members — insurers licensed to operate in California who would share in the plan’s profits and losses.Within a year of creating the plan, lawmakers were confronted by allegations the insurance industry was using it as a dumping ground for its risky policies to maximi...