Assembly Standing Committee on Insurance

Welcome to the Assembly Insurance Committee's oversight hearing on the California FAIR Plan. For many of our committee members, today is going to be their first hearing on this important and timely topic. A lot has changed since our last hearing, but one thing remains the same. The number of FAIR Plan policyholders continues to grow.

At our previous oversight hearing, it was relayed that the FAIR Plan may be one catastrophe away from seeking approval to assess their member companies. Unfortunately, that catastrophe took place on January 7th. The FAIR Plan sought approval to assess an occurrence that that hadn't taken place in 30 years.

Today, I'd like to hear about where the FAIR Plan goes from here. I'd like to welcome Victoria Roach, President of the California FAIR Plan. Good morning, Victoria.

Good Morning, Madam Chair, Mr. Vice Chair. Thank you for the opportunity to present today. Armand Feliciano here for the FAIR Plan.

Our goal today is obviously discuss the historical context of the FAIR Plan, its role in the market, the evolution of the FAIR Plan, including the population of the FAIR Plan, and data which we believe will be helpful to the legislature and the public to determine the status of the FAIR Plan after the wildfires in Southern California.

So with that, I'd like to introduce and turn it over to Victoria Roach, President of the FAIR Plan.

Okay, thank you. Good morning, everybody. So we're going to start with a little bit of background and kind of level set on the FAIR Plan, who we are, and why we're here, and then how that relates to where we're going. So go to the next slide.

So just to kind of give a little bit of background in terms of who we are as the California FAIR Plan. We were established in 1968 by the legislature to, in response to the Watts Riots, although now we're known for wildfire. We really were started because of people in the inner cities who couldn't get insurance.

And then subsequently there were some wildfires, and those consumers got stuck in the same boat where they couldn't find insurance. So it was expanded to certain areas of state. And now we write across the entire state. We have three primary purposes as established by statute, and we continue to follow to this day.

The first is to assure stability in the market, to make sure that there is insurance available for consumers, and to encourage maximum use of the admitted and ENS lines. So we are here to provide a temporary safety net until consumers can move back into the voluntary market and find insurance.

A couple of key dates that kind of define, help define where we are today. So in 1996 the legislature, after the first three assessments we had done it over a two year period, they passed legislation saying that they did not want the consumers of California to be subsidizing the premiums for the California FAIR Plan.

And therefore the California FAIR Plan needed to have actuarially sound rates so that we were taking in enough money to pay for operating expenses and projected claims in 2018. That was the first big year in recent history with fires. The Camp Fire, we were about 50 billion in exposure across the whole state at that time.

When the obviously fires hit, devastating fires earlier this year, we are now at about $599 billion. So we're closing in on $600 billion as of March 31. So the growth has just been exponential in the last five years. And that's kind of what we're going to focus on as we go through this. Next slide.

So by statute, we are the insurer of last resort. So what that means is there are about 118 admitted insurers in the state of California. More individual companies, but we group them together, about 118. Not all those companies are writing business right now and most are not writing across the entire state.

But that's supposed to be the first stop for people, right? That's where we want people is in those admitted care with those admitted carriers in the state. If they can't find insurance there, then they can move to the ENS lines, the surplus lines. There's about 132 surplus lines carriers in the state.

And then if insurance isn't available, they come to the FAIR Plan. Today, that's not what's happening. Right. There just isn't enough availability in the state. And people are coming to us first. Sometimes they're coming to us because of price and sometimes they're coming to us more often because they just can't get insurance anywhere else.

What we're finding now is instead of being a temporary safety net, we're becoming the insurer that people are forced because they can't find insurance somewhere else to come to. So whereas we kind of look at ourselves as, you know, I break my leg, I get crutches. The crutches are supposed to be there till my leg heals.

And then, you know, hopefully I'm not on crutches for the rest of my life. That's kind of the FAIR Plan. We're the crutch to get them through the crisis and back into the market today. As you'll see by our numbers, that's not what's happening.

So if we go to the next slide, we'll talk a little bit of how we're defined and how what makes up the FAIR Plan. So I think the first thing to kind of emphasize and something that is misinterpreted a lot is that we are not a state agency, we're not state funded and we're not taxpayer funded.

We are a not for profit. So our goal is not to make profit, to have a lot of money sitting around. Our goal is to be able to have enough money to pay our claims. We take in properties regardless of where they are. So whereas other insurance companies will manage their risk.

They say, oh, Lake Arrowhead, I have this many properties and this much exposure. I have enough in that area. We don't do that. Right. I would say we're close. And you'll hear this through the presentation. Close to a take all comers. Right. There might be an occasional risk we aren't going to write.

But for the most part, somebody comes to the FAIR Plan, we're going to write their insurance. So it puts us in a different light than the other carriers throughout the state. Another key differential is we are not subject to Prop 103. We are regulated.

There is a regulation that governs how we operate, but it's different than the admitted carriers. And so Prop 103 doesn't apply to us. We are not intended to compete or replace the voluntary market, which is key because right now, in some areas, because of our pricing, we are competing with them.

We've had brokers tell us, customers will say to them, we'll quote the FAIR Plan because I heard that they're lower priced. And we have some examples of that where it's just cheaper to come to us and substantially. And so people are coming to the FAIR Plan because of price.

And that's something we need to address as an industry. And then again, our rates are supposed to be actuarially sound. That means that we bring in enough money in premium to pay for operating expenses and projected claims. And we're not in that situation today, which is why our rates are so low. Go to the next slide.

The FAIR Plan is an involuntary association of its member companies. So every company that's licensed to write property insurance in the state of California is part of the association. That means that they are subject to be assessed.

If we find ourselves in a place where we can't pay for our claims coming in, which is what happened earlier this year. We'll go through kind of the assessment process because it gets a little more complex than that.

But basically, if a company had property insurance on their books two years ago, they would have been part of the assessment earlier this year. We have a plan of operation which is our governing document. It kind of sets the stage for how we administer the plan and what we can do and what we can't do.

That's in, that is approved and administered by the Department of Insurance. And the Department of Insurance also regulates the FAIR plan through our filings, contracts, rules, forms. All of that has to be filed and approved by the Department of Insurance.

So if we make any changes, we can't just make the changes just like any other insurance company, we would file them with the department and they would have to approve them. Okay, so next slide. Again, our role is to be the temporary safety net, right?

People come in, they get insurance, hopefully they find insurance somewhere else and they leave. At the end of 2023, our average insurer had been with us about five and a half years. So not a lot of movement in and out of the FAIR Plan.

They kind of, once they come, they tend to stay for a while for whatever reason. Right. Some of them have to be with us. Again, can't get insurance somewhere else. Some of them just don't look. And some of them are with us because it's just cheaper to be with us.

We find a longer tenure in the lower wildfire score area. So people who are not at risk of wildfire, which makes sense because our rates would be lower there because we're catastrophe insurers. So if you're not in a wildfire area, you're going to get a lower rate.

And we find that the tenure there is closer to seven years. The current state of the industry. Can we go forward one slide please? The current state of the industry is such that brokers and consumers alike cannot find a lot of options for people who are need insurance. Right.

Whether they're non renewed by their prior carrier or they bought a new home, the options are very limited out there. So the state of the industry has put us in the place where people are, for lack of a better term, they're flocking to us. Right.

They continue to come to us because we're the only thing available for them.

We're continuing to collaborate with the CDI, the legislature, other stakeholders to meet the market needs today that need to be met, while keeping in mind that our ultimate goal is to move these customers back into the admitted market and out of the California FAIR Plan. Right.

We're trying to, as we said, one of our goals is to stabilize the market. And the more we grow, it's just indicative of a less stable market. Right. It shows that the market is in an unhealthy state right now because more and more people are coming to the FAIR Plan.

So I'm going to hand it over to Armand on the next slide. He's going to talk a little bit about what we've been working on.

Okay, thank you, Victoria. So Victoria talked about the role of the FAIR Plan. So this is a snapshot of what it looks like. You'll see in the left column, the FAIR Plan stabilization. The middle column is the FAIR Plan expansion. And then on the right is the potential expansion of the FAIR Plan.

So going back to the left, as Victoria had talked about in the mid-1990s, there was a FAIR Plan assessment, and that led the legislature to pass AB 1754. And the thought process there is to give the FAIR Plan actual sound rates to help minimize the possibility of an assessment. Fast forward to 2020 and 2023.

The FAIR Plan started to grow, and the legislature, the CDI, and the FAIR Plan worked on a bill, a couple of bills, to establish a platform called the Clearinghouse within the FAIR Plan. I'll talk more about it, but in a nutshell, what it is, it's a.

It's a platform for policyholders to move from the FAIR Plan back to the admitted or private market. And finally, in 2024 and 2025, CDI sustainable insurance strategy. It's a comprehensive regulatory framework designed to open up the market.

And that's a critical part of fixing the private market in California because obviously, you have private markets offering more coverages than they can. The FAIR Plan can then depopulate and go back to the private market.

As Victoria said, moving to the middle column is that the FAIR Plan is, in its role in filling gaps of insurance needs, has worked with the legislature and the CDI to meet those needs by Californians.

And you'll see in 2021, that's when it really kind of started in that the farmers reached out to the legislature and the FAIR Plan CDI saying, well, we need coverage for farmers, including wineries. And you see SB 11 passed. The FAIR Plan now covers farmers, farms in general.

And then if you look, you move to the middle portion of that, you see the CDI FAIR Plan stipulations, starting with residential dwelling limits going from 1.5 million to 3 million. That's happened in 2021.

And then the next two bullets, you'll see the commercial builders, particularly CBIA, reached out to the legislature, CDI, and the FAIR Plan asking for more coverage on commercial projects. So that went from $20 million per location in 2023. It is now going to go up to $100 million per location in 2025. That's effective sometime in mid July.

And then finally there's a CDI order still pending that would require the FAIR Plan to cover homeowners just like the private market. That's pending. On the potential expansion, there are two bills that are moving. One, AB 290, extending grace periods to renewals, and then SB 525 requiring replacement coverage for manufactured homes and mobile homes.

I'll talk more about that in a couple of slides. But that's sort of just a flag to let you know there's potential expansion for the fair plan in 2025. I'll turn it back to Victoria.

Okay, thanks. So next slide. So to give you a little context around the growth that we're experiencing, so since 2018, we kind of look at that as a turning point for the FAIR Plan. In terms of growth since 2018, we've steadily been growing.

Our growth rate since then has been between about 8 and maybe 10, 11% a year, year over year, which is still a pretty healthy growth rate, especially for a residual market like we are. In 2023, we grew after the after the market change. State Farm pulled out, other companies started pulling out. We started growing exponentially.

So last year we grew 40% year over year in policy count and we grew 60% in exposure. We are tracking to hit those same numbers this year. So we're six months into our fiscal year. At the end of March, we are at close to 575,000 policies at the end of March and close to $600 billion in exposure.

And the growth just keeps going. Right. We don't see, we don't see a change yet in the trends. We're watching month over month to see where we are. But the new business just keeps coming in. We continue to have a concentration of risk in the wildfire areas, and that's not going to change. Right.

That's what we're here for. We're catastrophe insurers, we're ensuring in those wildfire areas. The difference we're seeing now in this growth is that a lot of this growth is happening in the low wildfire hazard areas. So we developed divide them into low, moderate, and high.

In the high areas, over the first six months of this fiscal year, we've grown about 12% or so in exposure. In the moderate, we've grown about 23% in exposure, In the low wildfire risk area, we've grown about 40% in exposure so far in the first six months of the year.

Now our numbers are lower because we didn't have as high concentration there. But that's where we're seeing a lot of that growth, where we're seeing a lot of what I would call normal suburban tracked homes come in, which is not what we've been ensuring in the past. We've always had some urban policies. That's not.

That's not a difference. Right. We've always had some because people will have too many losses and they can't go to a preferred carrier or their home's not in good condition and they come to us. But most of our business comes in that wildfire area. That's not what we're seeing today.

Our customers, regardless of where they are, regardless of who they are, continue to be our priority and we will continue to be our priority and we will continue to do everything we can to be here and support our customers through this.

But we always keep an eye on that ultimate goal of moving them back into the admitted market. It's just a better. It's a better place for them and for the industry in general. It's better if we start to shrink versus grow.

And so we keep that in mind as we're doing things internally and with the legislature and the CDI and our stakeholders to make sure we're meeting their needs today. So we're going to talk about that goal of depopulation.

If we go to the next slide, Armand's going to talk a little bit about what depopulation means and kind of what's affecting our ability to depopulate besides the state of the market today.

Thank you. So at a basic level, and I think folks know, but depopulation is worth defining. Right. It's basically the FAIR Plan policyholders moving out to the private market. And that's really at a very basic level.

I think it's important to note though, at the outset, the FAIR Plan of the day does not have a direct mechanism to simply tell people, get off the FAIR Plan that with limited exceptions, but generally there's not a button there to push.

So again, the question of there has to be somewhere to go for the policyholders and that's the admitted market. That's why we put it up there. Collaborating with CDI on sustainable insurance strategy is a key component of that. Opens up the market, then the policyholders have somewhere to go. Victoria touched on adequate rates.

I think it's just the bottom line there is the FAIR Plan rates cannot be lower in the private market. Otherwise depopulation is going to be hard. Why would you leave the FAIR Plan if you're paying $2800 average average in the low areas, Right? Because you'll hear the FAIR Plan is so expensive.

That may be true in the wildfire area, but in the lower areas, non fires they're not. So that's an issue. That's there. Clearinghouse. So again, I think I said the Clearinghouse. It is a platform. And as passed by the legislature, the way it works today is this.

If Armand a policyholder FAIR Plan wants to leave the FAIR Plan, it starts with a private market. Let's just say State Farm wants to take me out of the FAIR Plan. State Farm has to negotiate with my broker. Just say Victoria is my broker.

So State Farm reaches out to Victoria and says, I'm interested in placing Armand to another policy here. Let's negotiate. I say that because there really is no direct influence by the FAIR Plan in that process. Yes, they're the platform, but the two parties, independent parties, have to negotiate. And that's just for context.

So folks know that's not like the FAIR Plan. And well, you got to go. You got to go to this State Farm policy. That's not within the statute. That statute is pretty clear. The broker record has to agree for a month to leave the policy. The FAIR Plan.

I'll pause there because I know, Madam Chair, you correctly reminded me that some of the members are the first time they're hearing that. But I'm happy to answer questions on the Clearinghouse now if there's any. If not, I can keep going. Okay, sure. Thank you.

And then the last two bills, the FAIR Plan's role has been to collaborate with the legislature and CDI when there's gaps. Right. So AB 290 was largely an automatic payment issue to establish within the FAIR Plan. There is one line in there that extend grace period for renewals.

So that means is that if somebody failed to timely pay the FAIR Plan during renewal, not on a monthly installment, then they get to stay with the FAIR Plan still. So that affects depopulation. SB 525, the Fair Plan has no position. That bill, it's not here yet.

But the bottom line with that bill is the FAIR Plan covers manufactured homes and mobile homes for actual cash value. And that bill says it will not include replacement cost coverage. The difference is an actual cash value is mobile home burns down minus depreciation.

The FAIR Plan pays that. With the new coverage, replacement coverage is that, let's say you have a 2000 old mobile home that burns down, you get a new one. So that's going to be expensive. The thing to note is that according to the supporters of SB 525, they have about 500,000 policyholders that need replacement cost coverage.

So theoretically, if they all went to the FAIR Plan, that doubles the amount of policyholders the FAIR Plan has. Theoretically. And we flag that because, you know, you get asked a lot, well, how's the depopulation going? Well, these are the dots to be connected, right. For the FAIR Plan to depopulate successfully.

All these five things are factors affecting that. Alright, I will. Next slide.

Next slide. So I know we've talked a little bit about actual A sound rates and why we need them.

I'm not going to go into depth on this slide, but I want to kind of put this into context as we get into assessments and why we assessed and how the assessment process works.

Actuarially sound rates, again, mean that we're taking in enough premium to cover, excuse me, our claims and our future, our future claims and our operating expenses. There are mechanisms for us to get more funding if we don't have enough. Right.

But the, the key to this is, again, we're trying to help create stability in the market and we're trying to help with the SIS and we're working with the CDI to say we don't want to be the affordable choice necessarily. We want to be here for people who can't get insurance somewhere else.

And when you look at our, our average premium for a dwelling policy in 2021, and forgive me if I get the numbers exactly right, but in 2021 we were at about $1800 was our average premium. In 2025, we are at about $2800 per average premium. So not a huge growth in average premium.

When you look at our average policy limit has gone from about 680,000 in 2021 to over a million dollars now is our average policy limit. So you can see the trend kind of goes along the same trajectory except for this last year. So we finished, our last rate increase went in in December 1st of 2021.

And so now those have all gone in and now we're seeing kind of the flattening, right where we were at 2800, we're at 2799, I think we're at 2814, we're at 2799. We're kind of seeing a flattening of the rate, which is what we would expect at this point.

But a key component to that is also going to be that we're riding in these lower risk areas. And so the more it's going to bring that average down. Now, obviously, the CDI, the, the legislature, nobody's going to hear about the people who are paying $600 for their policy. Right.

They're going to be coming to you with the 10,000 dollar bill because they're in the wildfire area. So we get that. But just to provide context in terms of how we're bringing in the rates. Right. We are working with the department today to talk about our next dwelling filing to try to get to an actuarially sound rate.

The closer we can get to that, the better off we're all going to be when that next catastrophe hits and we're put in the position of paying claims again and people are in a position of losing their homes and looking to the fair plan to help them, we'll be in a better position to handle that.

More of that ourselves versus going directly to the industry for money. That's what we're trying to get to. So let's, if we go to the next slide, we're going to talk a little bit about how this process works and what is available to us when we don't have the money available to pay claims.

So the first mechanism I'll talk about is assessments, because that's kind of where everybody's mind is. Right. So these horrendous wildfires hit in January. Right. January 7th. And worlds, we knew it in Southern California changed, and it was pretty quick for us to be able to see that.

We didn't know if we were going to have money to pay all the claims that were coming in. And we'll go through kind of our numbers, but we had a big piece of the areas that burned and just to kind of level set, not high wildfire scores. Right.

These were moderate and low wildfire risks that burned in these fires mostly. And so but when we looked, we thought, okay, we're getting a lot of these claims in.

We needed to kind of get our arms around it and figure out, because we didn't want to be in a position where we didn't have enough money and had to slow claims payments down. Nobody wants that. Right. And it's important to note that the assessment mechanism is by statute, it is how we're designed. Right. Nobody likes it.

I didn't sleep for a week while we were trying to figure this out. But it is how we're designed and it is what we're supposed to do. Right. And the industry knows that. Right. But so what happens is my finance team comes to me and says, this is. We're going to.

We're projecting out how these claims are going to pay, and we're projecting out the money we have coming in, the reinsurance we can tap into. And we think on this date we're going to run out of money. So if you want your heart to stop, that's where it stops. For these people, it had already stopped. Right.

They lost their homes. We couldn't be in a position where we'd have money to pay for their homes. And so we then take that information and bring it to our accounting committee, which is made up of member companies. The CDI also sits on that committee. And we walk them through the numbers and they make a recommendation.

And their recommendation was that we assess a billion dollars. Right. There was a lot of discussion. Should we go a little bit lower, should we go a little bit higher? We end up at a billion dollars.

We then take that recommendation to our board, also made up of member companies also attended by the CDI, so everybody can discuss what's happening and how it works. The board unanimously agreed we needed to assess. They agreed a billion dollars was the right number.

So then we took that and had discussions with the department, put together our request, sent that in, and they turned it around as soon as we gave it to them. They knew we'd been working with them all along. They knew what was coming.

And the process, thankfully for the people who are affected by the fires, was very smooth. There were no glitches, there were no hangups. There was none of that. What happens then is we go out and we assess our member companies.

Not to get too technical, but just to give you an idea of how this works, because I'm sure you've heard some of this. We look at the group of policies that have losses, those policies. Then we look at the effective date of those policies and were they effective in the prior fiscal year or the current fiscal year?

And so they're split between fiscal year, they're called pool years. And then based on, let's say the policy was effective in September of 2024 and they had a loss in January. That, the member company, would be assessed based on their market share in 2022.

For the policies that were effective in our 2025 fiscal year, which started October 1st of 2024, they were assessed in the 2025 full year, which means the 2023 market share. So it was split for companies they had some of.

Some of the assessment was assessed at one rate and some at another, depending on the effective dates of the policies. We send them a bill and we say, here's your share of the bill based on the market share. And then they have 30 days then to remit the money to us. And so that's how that happens.

If there's any questions, if there's any confusion, if there any debates about it, then we take those to the department and they work with us and the other company to figure out where they stand. So, and I can say we had. I don't remember what the number was, but well over 80% within the first 10 days paid.

We had over 80% of that money in the first 10 days. So it was a very, like I said, a really smooth process, and everybody understood this is where we need to be. Of course, then, now, everybody now asks me, well, when's the next assessment? What's coming now?

And the answer is, we don't know, but we don't have a lot of money at this point. And so when fire season really gets going, we're praying for a mild season, because if we have another large event or several small events, we could be in assessment territory really quickly. And that's what we're trying to prevent here.

So if we go to the next slide, this is kind of just the history of assessments. So we assessed in 1993 for the first time as $150 million following fires kind of in the same areas where we saw the fires, this time, unfortunately, in Altadena and Malibu.

And then the next year, we got hit with the Northridge earthquake, and. And we ended up assessing twice because the first one we ran out of money, and so we had to assess again. So over those two years, we assessed for $260 million. We haven't had to assess in 30 years, thankfully.

And now we assess for a billion dollars in 2025.

The other mechanism, if we go to the next slide, please. The other mechanism we have at our disposal is reinsurance. So every year we go out and we purchase reinsurance to- which in its basic terms is insurance for an insurance company. Right. We ran out of money. The reinsurers start paying when we purchase reinsurance.

There's only so much available for wire- wildfire. I mean, of course there's only so much we'll pay, but there's only so much capacity for wildfire. It's still an uncomfortable peril for a lot of reinsurers. They aren't really comfortable with wil- wildfire, and so they're trying to kind of figure it out.

It didn't help that the fires didn't help from our standpoint that the fires were in January and we say our wildfire season starts July, August and in January, while we were negotiating our reinsurance for the next year, we were- the fires were burning. But again, like the industry, the reinsurers stepped up right away.

As soon as we sent them information that we needed money, within 10 days we had checks. So everybody understands how it works and that's what they're there for. And the reinsurers were really good about it. This is our new tower. So we- we renew on March 1st. So this is our new reinsurance tower.

So this is not the tower that was in place when we had the fires. But how. I just wanted to kind of walk through a little bit how this works. So the first column on the left, the loss amount, that's kind of where you know from one event.

So Palisades in Eaton was one event because they happened at the same time and within, within a 250 mile radius. So that's one event. So for one event, we hit the tower the first. Now in this new tower, that first $1.25 billion is ours. That's basically our deductible.

So anything that hits up to $1.25 billion, the Fair Plan is responsible for paying our own claims. We don't hit reinsurance. And since it's one event, you have to think about it, you know, God forbid we have another wildfire, let's say in August and it's a $500 million event.

And then we have another one in October and it's $1.0 billion event. That's 1.5 billion. But we're not going to hit our reinsurance tower because they're two separate events.

So that's why I say it could be one large event or it could be multiple small events to get us to a point where we would have to assess as you go up the tower and you look. So we'll pick a number. If you look at the third row down, $4.9 billion.

So if we had an event where we were going to hit $4.9 billion in losses, we would collect about $2.5 billion from the reinsurers, and the other 2.4 billion would be our responsibility. So between what we had at the Fair Plan and then we would move to assessment because that would be our next mechanism to have money.

And that's how this plays. There's a lot of timing pieces, which is what we get into with the accounting Committee and the board and the Department of Insurance, because we have to keep paying and the reinsurers pay based on what we project we're going to pay in the next 30 days.

So we might have more reinsurance out there, but not be able to access it right away. And so that's how the, how much do you assess comes into play, right? Because you have to kind of estimate how much you're going to pay in your claims, how many of your claims you're going to pay in 90 days.

So we know we're going to have money. And reinsurers are only looking 30 days out, but they remit the money right away when we send it to them. So it's- it's a, you know, as, you know, as most of you know, we operate on cash in, cash out basis.

So hopefully not the way I used to manage my checking account where I could just be like, well, I have checks, so I'm going to write money and that check's not going to cash for in the olden days, when I was younger, the check's not going to cash for three weeks.

I can write three checks because I'm going to get paid again and I can cover those checks. Right? It's a little bit like that, right? We know the money we have coming in from our premiums. We know our investments, if we have any, what's coming in, and we know more or less what our expenses are going out.

And so then we just estimate the claims on top of that to figure out where we're going to be. So if we go to the next slide, we are looking at additional mechanisms to help us be more financially independent. So we are in support of AB 226, which is Assemblymember Calderon and Alvarez's bill.

That bill gives us access to additional potential funding for the future. So the first thing and one we've been trying to work on for a while. Here is a line of credit. The line of credit won't really take. Like it doesn't in particular say we don't need to assess.

But a line of credit would give us some flexibility kind of to cover those checks right. As we're writing them, and gives us a little more time to figure out, well, how is that going to play out? How is reinsurance going to play? And do we have more time before we need to worry about assessment?

So we've been working for a couple years now with different banks to try to get a line of credit set up. And- And we're very close now, and this bill is going to very much help us in that respect. So we're very happy about this.

And then the other piece of it is it gives us potential access to bonds, which is another mechanism to kind of help us Fund. So we're not so close to assessment. We're going to have to work through the logistics and see how all this plays out.

But this gives us access to avenues that weren't available to us in the past. So- So we're in support of this bill going forward. So if we move to the next slide, we're going to talk a little bit about the devastation that happened in Southern California and how the Fair Plan plays into what's going on.

I'll start with the first topic, which is heavy and hot in the news, which is smoke claims. So I just want to kind of level set as to what our policy covers. Right. Our policy, which again is filed and approved by the Department of Insurance, covers smoke and fire when there's direct physical loss.

So there has to be a change in condition in order for us to cover it. The smoke or ash in a house is not necessarily covered if it hasn't damaged anything. Now, sometimes smoke in and of itself will damage things. Right? It'll damage the walls, it'll damage porous surfaces.

A lot of times the carpets, the couches, the mattresses, things like that. If it's beyond repair, we'll cover it. If it needs to be repaired. So if it needs to be deodorize, we will- we will deodorize. Right.

We do send an adjuster, an independent adjuster out to the home to look when there's a claim, they go through the home and they look at the home, they take pictures, they write up a report and they tell us if there's damage and what that damage is. Right.

And somebody from our team then looks at it and we say yes or no. If there's no damage, no visible damage. We will tell the customer it looks like there's no damage. There's no claim at this point, once you clean the house, if you find damage, come back to us and we'll reassess.

Because sometimes that's what it takes, right? It takes cleaning it to know that there's damage to an electronic or, you know, and some of it we know, like we've seen white couches where the ashes just ground in. You're not gonna be able to clean that. Right.

Or sometimes you can clean the whole house, but it will still smell of smoke. So we'll deodorize the house. If there's a question, you know, we'll take it, we'll go back and we'll look at it again.

We're not denying them right out and we're not telling people you have to clean your house before we're going to come out and even look at it. We will send somebody out, we will look at it. But if there's no direct physical loss, it's not covered by our policy. And that is not.

We're not the only ones in the industry that do that, but that's how our policy is set up. And again, those are forms that are approved by the California Department of Insurance and are supported by case law.

If we go to the next slide, we'll talk about kind of what happened with us with the fires and how many people have been affected that we ensure. We've had over 5,500 claims total from the fires. Close to half of those were total losses. When you look at the areas that.

In the fire map in the Eaton fire and Palisades together, what you're going to see is that we had a high market share and again, not high wildfire hazard area. We had a high market share in, in the Eaton fire of the homes, the structures. Not the homes, the structures that were in that fire area.

We insured 13% of those homes. It's a pretty high percentage. Right. Of high concentration of risk there in Palisades was 23%. Right. There were a lot of non renewals in that area. We picked up it fast. Grew to I think the second largest concentration of risk in Southern California in the six months prior to the fire.

So we didn't- It wasn't- It was always a- We had a decent amount of coverage in that area, but not like we did in the last six months. We picked up a lot of policies in six months in that area. So we had 23% of those structures. To date,

and this says this was through May 9th, but I did check it last night. We paid over $2.9 billion in claims so far. Our estimate is that we're going to pay close to $4 billion total when all is said and done. We've closed more than half the claims already, so over 3,000 of the claims are closed.

We have 2,400 open claims. I checked last night. Of the total losses, we had in Eaton, I think we have 88 that are not closed yet. But we paid the dwelling amounts. There are just other coverages that haven't been closed yet. So we're- we've definitely focused on getting those total losses and getting money to those people for total losses.

And we focused on getting people money so they can continue to live their lives while they figure out how to get through this devastation. So how did we do some of that?

If you go to the next slide, we have about 260 employees of the California Fair Plan, and then we have about another hundred employees that we partner with companies to set up additional teams to support in underwriting claims, finance, that sort of thing.

When the fires hit, the first thing we did was reach out to our partners in claims. And we brought on. This is about 200 is what we have now. We brought on over 300 people in within two weeks. So we brought in 300- 300 new people within three weeks. Some of them were field adjusters. Right.

To go out and do these and do the inspections of the homes. And a lot of them were desk adjusters. So people who are taking in the claims and working the claims from their desk.

For example, if you have a total loss, if we have pictures or we can find out on the news or on Zillow or something, we don't need an adjuster to go out and look at those. We can pay on those claims. And so. And so we had over 300 at one point.

I think we're down to about 200 additional people right now. We extended our customer service hours to the weekends so that people needed to call in and report a claim or had questions they could get through to somebody. We, again, limited staff. Right. 260 of those.

Most of those people are people that are on the phones or working applications doing claims. We don't have a lot of people that we could send out to be in the field. Right. That's just not how we're staffed because we're a catastrophe insurer.

And so we're not staffed to have a lot of extra people that could be out in the field. But we knew that was important. So we made sure that we could participate in key events. We had the workshops that were led by the Department of Insurance.

We had teams of people go out to those to handle, to talk with customers firsthand from Eaton and Palisades. We worked with our brokers to make sure they had all the information they needed to support their customers.

So we had daily webinars with brokers to help them understand the claims process, answer any questions about coverages, that sort of thing so that they could assist their customers. We went out to the Palisades and Eaton FEMA Disaster Recovery Center- Centers and participated there again meeting with consumers there who were affected by the fires.

And we've done numerous regional town halls, right. And gone out and spoken to people and answered questions and provided information.

So as much as we can without jeopardizing the- our ability to handle the claims as they were coming in and managed through and work with the customers who are affected by the fires, we got out and were out in public trying to be seen and heard and help people on the ground.

So that's where we are from a fire standpoint. Before we close, I just wanted to, if we go to the next slide, one last topic here. We've been getting a lot of push to be more transparent, right.

We put data out last year on our website that had never been there before in terms of our growth and our exposure, our the policies by zip code and by county. We've tried to get more information out there and we continue to get questions about, well, why, you know, can we have this information, put this out there.

We're trying to be more transparent. I will point out, with all due respect, we are a private organization. We are not a public entity. We are not state funded, we're not a state entity.

However, we're trying to work again with everybody to do what we need to do to make sure the consumers and the public are aware of what's going on. So we have gone through and put out more information on our website that we continually things we get asked for.

So we think having it out there will make it easier for people. We link to the insurance code so people can see what it is that what the regulations are that govern us. We put our plan of operation out there so they can see how it's administered and what we've agreed to with the California Department of Insurance.

We've listed our governing committee member companies are out there. We put our product forms out there. People ask us for samples of our dwelling policy and our, and our commercial policy. And then we put our financial reports out there. So we get a lot of questions about our financial reports.

And up to this point we haven't been able to put them out there. We've worked with our auditors, so now we can put them out on our website and people can kind of see where we are from a financial position. So hopefully that provides more of that transparency that everybody's been looking for.

So with that, that concludes the official presentation and we're happy to try and answer any questions.

Thank you, Victoria. I appreciate you being here today. And Armand. So now I'm going to open it up for questions from members. Assemblymember Harabedian.

Thank you, Madam Chair. Thank you, Ms. Roach, for being here. And Armand, good to see you guys. And sorry we didn't get a chance to sit down yesterday. Floor session was a little bit longer than anyone expected, but this was extremely helpful. And obviously the information there was a lot of it.

So still, still digesting, but appreciate everything that you guys just went over. I have a couple questions and- and some of them are probably easier to answer than others, but I guess just the upshot and why you're here is really about the ongoing viability of the Fair Plan and whether it can survive and if so, how. You know.

What- What do we need to do as a Legislature to make sure that you can survive and continue to be the insurer of last resort? So what do you think, generally speaking, is your assessment of the- the Fair Plan's viability going forward?

I mean, we're viable because we've got the backing of the industry. Right. But viable in and of by ourselves is something we're still struggling with. Right.

So if we really want to be financially stable ourselves and not have to be so reliant on this possibility of assessment, there are some things that we're working on that we need to do. We talked about the rates a lot.

We're talking about some changes in our plan of operation that we're going to be working with our board and the- and the Department of Insurance on. We are not. When we went into these fires, I believe we had about $400 million in surplus.

I've now, I've only been with the Fair Plan five and a half years, but that's the most money we've ever had in that five and a half years was 4- $400 million. And when you're talking against $600 billion in exposure, it the math doesn't make sense. Right.

And so in the past, the Fair Plan has made disbursements back out to the Member companies when they've had capital on hand, we did not disburse that out. Right. It go- That disbursement process works exactly the same as the assessment process. Right.

It goes from us to the Accounting Committee, from the Accounting Committee to the board, from the board to the Department of Insurance. And I think everybody was of the opinion that $400 million wasn't going to make much of a difference to these individual companies in the industry.

But for us, $400 million was 400 more $1.0 million we could use to pay losses without going through an assessment process. So I think that's part of what we're talking about with the department right now is kind of how do we make that more of a reality. And it's going to start with the rates. Right.

And it's- And we're going to have to get to a point where, where we can depopulate. Right. And I think everybody wants that. It's part of the sustainable insurance strategy. The first piece of that has to be that the admitted market has to re engage. So there's some more people to go.

But we're going to have to have a mechanism or some way to move customers from the Fair Plan back out to the admitted market. Because if we continue to grow like this, the viability becomes more and more in question.

Mm, that's helpful. You know, one thing that struck me about your presentation was the growth in non fire designated areas. And that- that's super counterintuitive to me and I don't understand why that would be the case.

Why are- Why is there so much growth amongst your policyholders now or new policyholders in areas where your member organizations should be insuring them at better rates, at, you know, lower premiums, higher coverage? Why would anyone go to the Fair Plan unless you absolutely had to because you're- you in a fire designated area?

I think there's a couple of reasons. So again, there's always going to be some level of people in non wildfire areas. So people who have multiple losses on their homes where the- the member companies don't want them because their risk is too high. People who, older, smaller homes where they're not as well maintained might come to us.

We're always going to get that.

I think what's happening now is we had so many of the larger carriers either really limit what they're writing or stop writing that there wasn't a lot of places for people to go.

Right.

And depending on if they're, you know, if they were insured with a- with a company that has captive agents, those captive agents don't have a lot of opportunity to place business somewhere else. So they're going to come to the Fair Plan probably faster than a broker who has some other options.

But even talking to the brokers there are some areas where there just are not a lot of options. Right. So you have to. It's a mix. The other thing is we are lower priced. When you look in those low wildfire areas you are going to find we have.

Somebody just sent us an example last month where the policy with us, it was about $682 I think was the premium. So first of all I would love to pay $682 but it's not full coverage. Right. But $682 was our premium. Then they went to get a differences in conditions policy so they would have full homeowners coverage.

The differences in conditions policy was $1,100 so they were under $1,800. For the- For the two policies together, the broker was able to quote two other insurance carriers for that same coverage. One was $2,900 and the other one was close to $4,000.

So the customer was like, no thanks, we'll go to the Fair Plan and get the DIC policy because we're not going to go there. And we're finding more of those types of examples from the brokers where in these non wildfire areas in particular, it's just cheaper to go with us now, you know, and you're seeing it right?

You see the rate increases other companies are taking and that's why we're working with the department to get our rate increase through because we need to raise our rate so there's more incentive for people to leave when there is coverage available.

That's helpful for I- for- I guess just, you know, my experience, I obviously, you know, represent Altadena where the Eaton Fire was, most of the Fair Plan policyholders in my district, my constituents actually pay a lot more for less coverage. So they're- they're in that bucket of folks who would love to be off the Fair Plan. Especially now.

Just some questions about statistics and I don't know if you have any of- of these answers but I just wanted to know over the last five years if you have the numbers of- the number of policies you've issued renewed and non renewed.

I don't have, I don't have those. I mean I have the new business numbers. They're on our website so I could pull those. The, and I apologize, I thought I did. But the- the non renewals are very low. They were higher. Right. Our last rate increase that or rate change that we had in 2023.

We worked with the department to establish a surcharge for condition so that because we're the insurer of last resort, we don't want to tell somebody your house isn't in great shape, it's not well maintained. And so therefore we're not going to insure it, but we need to charge appropriate premium.

And so what we did was we put in a surcharge if there's a condition that is not meeting our guidelines versus non renewing those. So our non renewals are minimal. Right.

Really the only reason, not the only reason, but primarily the only reason a person leaves the Fair Plan because we tell them they have to leave is because they don't pay their premium. Other than that, we're really not non renewing anything.

We wrote, I think we wrote about 128,000 policies, new policies last year, and we have written over 65,000 policies in the first six months of this year. So the numbers are staggering compared to where we were five years ago.

Got it. And all the- That information's on your website. Just the amount of--

Yeah, that is on our website.

I appreciate that. And then the average premiums for the past five years. You did talk about this a bit in your testimony. What has the average premium look like over the last five years?

You said stabilized, I think in the last two years.

Yes.

But has it increased in those first three years?

So I did pull that because I knew- I knew you wanted to hear that. So. And I apologize for not pulling the other one. So in 2021, our average premium was $1839. And then over the course of the four years since then, it's jumped to 2200, 2500, 2800. And now it's staying stable at about 2,800.

During that same time period, our average policy limit has gone from 684,000 up to just over $1.0 million now. So you kind of see, and I apologize, I should put the slide in there.

You kind of see the same trajectory, except for that now the premium is leveling out, but the amount of insurance is still going up, which tells us that that's in that- those lower areas where we're getting more policies and higher limits because their premium is not as high.

So there could be a lot of increases on the- the more risky policies. Premiums could be going up dramatically there. But obviously if you're bringing in more low risk policyholders, then that kind of flattens out the average potentially. I mean, I don't know what the mix.

Absolutely.

So in what our last rate increase was, I believe the average was 15.7%. But there were customers that had 200% increases and there were customers had no increase. Right. So it just depends.

And this slide was really helpful on the response to the fire claims. So I appreciate this. And just a couple of questions because I- I did want to know about kind of the timeliness of payments. And it does look like you guys are getting through these claims very well.

Do you know of the 3,000 or so claims that have been closed, I mean, how many of those were closed and denied? Or- Or, you know, do you have a percentage of how many claims were put in from the Eaton in the Palisades fire? I think the total loss claims are probably a little bit more straightforward.

But whether it be smoke, total loss, any sort of damage that were denied.

You know, I knew I was going to get that question. I meant to- I meant to ping my VP of claims last night to get it. Here's what I know. Most of the claims, if they were closed without payment, are closed because they were duplicate. We had a lot of people panic, understandably. Right.

And send in their claim two or three times or they send in an initial claim for living expenses. And then when they found out their house was destroyed or there was damage to their house, they turned a second claim. And we combine those. Right. And so that- so that's where we're seeing them.

We're not seeing a lot of straight denials. We've had a few.

And when they are denied, if there's even a partial denial or denial of a claim, when we send that denial letter out, we do tell customers that they have the right, you know, the ability to go to the Department of Insurance and- and file a complaint if they believe that denial was- was not right.

I can get you those numbers, but I don't have them off the top.

Okay. Yeah, we can follow up. I appreciate that. And of the 2.75 billion in claims paid, do you know how- how much of that or what percentage reflects a full policy limit payout?

So even for, you know, I mean, you can break it down into, you know, a lot of different, you know, whether it's a claim A, you know, B, I don't know exactly how you guys break it down or what kind of information you have, but I guess the question about the 2.75 billion is, is everyone getting paid 100% of their policy limits, what they're owed in a total loss and

or if they had damage, are they getting paid everything that they- that the policy would allow them to get paid?

So the- So the way the total losses because of course, those are easier to explain. Right. The way the total losses worked is if somebody- if somebody turned in a claim for a total loss, we went to try to confirm that it was a total loss.

If it was a total loss, and we could get a replacement cost estimate that was close to what their coverage a amount is. We paid. Right. We advanced 50% right up front. As soon as we knew it was a total loss, we advanced 50% of coverage A.

We advanced 50% of the personal property limits or the full personal property limits if they were up to $250,000, sometimes even higher. If you have a $2 million house and you have $400,000 in contents, we probably paid the 400,000 without asking for anything. Just we tried to be reasonable about what we were paying.

So the- the first 50% gets paid right away. The second 50%, then we wait until we get a replacement cost estimate. If we can get one that's pretty clear and it's close to where we need to be. We pay the policy limits on those. So a lot of people are getting paid full policy limits.

I don't have a statistics in front of me, but a lot of people are getting full policy limits. We do have. You know, you'll hear it, I'm sure, because you guys hear the horror stories, right? We do too. The ones that come to me are the ones where they're carrying $2 million, but the house.

The replacement cost on the house is only, you know, $1.1 million. And they're like, where's the rest of my money? And so that's when we get into the. We need different estimates. We need to- you need to go back and talk to your broker about the coverages you bought. We don't-

The Fair Plan does not determine how much coverage somebody should buy. So we don't play into that process and say, your house is worth X. You need to have this much insurance. That's between the broker and the customer.

So if there's a question about I didn't have enough money or I had, you know, I carried all this insurance and I'm not getting paid enough, we send them back to the broker to talk about how they determine what their coverages were that they needed.

Okay, that's helpful. And then we can follow up on specific data in there. And then my last question really has to do with the smoke claims and direct physical loss. And I do think that this is beyond the fair plan.

But obviously a lot of our Constituents who are dealing with all of us who have dealt with wildfires. It's hard to, it's hard to come up with a clear definition of direct physical loss when it's smoke. I mean, if your house smells like smoke and if you have ash throughout your house, obviously that house is still there.

You can technically still live in it. You still have a roof, you have four walls. But this is something that's been litigated a lot.

And I do think that the more unfortunate, unfortunately, the more wildfires that occur here, I think the industry needs to come to terms with what exactly does this mean and how do we do it universally? Because right now it depends on what company, whether you're on the Fair Plan or whether you're on other companies.

People are getting different outcomes on their smoke claims. And I don't think it's fair. And I just want to know from a fair plan assessment what to you is a direct physical loss with a smoke claim? Because what you said is there could be, you know, smoke. You could, you could smell it, you can deodorize it.

But if you know that there's been smoke and ash inside your house and it's been in your AC unit, it's been through your filters, would that lead to direct physical loss, in your opinion?

Or would it have to be something to where the smoke is- has stained the walls and you need to do something that amounts to rebuilding your house effectively?

It doesn't have to amount to rebuilding the house, but there has to be by definition a physical change. So could it be in the electronics? Could it be the air conditioning unit? Could it be the walls? It could. It's really, I hate to say this because it sounds like a cop out, but it's the truth.

It depends on the claim, right? And there, what we're looking for is a physical change. So let's take, we'll take an easy one, right? My couch, my couch has ash and soot on it from the, from the fire, right?

If it- If it looks like that ash is such that it can be cleaned, and most of the times it can, we're going to tell the customer there's no. That couch can be cleaned and it's going to be fine. So the customer cleans the couch and they call us back and they say, it still smells like smoke in here.

So we go back, we look at it, we say, okay, it still smells like smoke in here. We're going to deodorize the house. So we pay to have the house deodorized, and then you look at that couch. And the couch is just not clean. It's not going to come clean. That's direct physical loss.

Because now that couch is altered and it's never going to be a clean couch again. It's never going to be in the shape it was. We'll replace that couch. So it really depends, and a lot of it depends on how close you were to the fire, on how much you're, you know, how much exposure you had.

Did you have burn in your yard versus your neighbor's yard? It's really hard to say until you look at each individual claim. And I think that's what your point is. Right? Yeah.

Yeah. I appreciate that. And I'm going to thank you for your time and give it back to the chair. Thank you very much.

Yes. I'm going to turn it over to Assemblywoman Hadwick. Thank you, Assemblyman Harabedian, for those good questions. And again, I'm really grateful you came back and you're here, Victoria, because I know you always do your best to be transparent and provide the fullest answers that you can.

But, Armand, I'm going to ask you to please make a commitment to answer the questions that were not answered by Assembly- Assemblyman Harabedian. If you could please do that for me and get those answers to him directly, I'd greatly appreciate it.

Yeah.

I'm happy to follow up.

Thank you. Assemblywoman Hardwick. Hadwick. I butchered your name sorry.

Yeah, you're good. You're good. So I am also nervous about the solvency. And we- we talked about depopulation. How do the other states depopulate? Do they have plans to do that? Because we don't have a plan to do that. And that would help you get more solvent, right?

Yeah. So, you know, every plan, every state, there's 35 states, might be 36 now with Colorado have a some kind of residual market. Some have two because they have beach plans and wind plans. But 35 or 36 states have some type of residual market. Each one handles it differently.

There are different pieces of regulation that might require their rates to be higher than the market. There are some that are more specific to you cannot come to the residual market if there's availability in the standard market as long as. And they'll put a percentage. Right.

So if the premium's not more than 20% higher than what you would pay with the residual market, you have to go to the admitted market. And so what happens then is the residual market just says you're not eligible for coverage with us. And they do the same thing on renewal.

They run comparisons with admitted carriers in the state and they say there's availability out there. You can't stay with us, you have to go. So it goes from they don't touch it at all to I think that's probably the most real depopulation mechanism that's in place. And they run the gamut in between.

Okay, Is there anything that we could do to help with that to keep you solvent as a committee?

Well, I think that the mechanisms are in place. Right. You got AB 226. You have the SIS. So, Victoria, I think I mentioned it took a while for California to like get to this level and it is going to take some time to get out.

So, I mean, I think there's no one answer today, Assemblymember Hadwick on that issue. I think it's a- it's a variety of things that need to kind of line up.

Okay. And I- I want to thank you for taking the time to meet with us, my team, that always helps to be able to answer questions.

I did express my concerns about the modeling and act after a fire, after those burn scars have happened, how we assess those properties because they're not going to have that same fire risk.

So I appreciate you looking into that for me and I just want to thank you for working with the public and being more transparent and offering to come to town halls for us. And I think my district has probably been hit the hardest with representing 11 counties that are very forested.

And my team's actually already been looking up the info off your website to know exactly how many policies we have and the growth and the percentage. So I think you guys are doing a much better job on the transparency front. So thank you for that.

Thank you.

We also have AB 69, which is a Fair Plan depopulation bill too. Just wanted to throw that out there. So I have a question. Considering that the Fair Plan is not subject to Prop 103, do you think the governing committee provides sufficient and fair oversight?

I can only talk to my experience with the member committees. Right. So the Fair Plan governing board is- has nine voting members who are representatives of member companies. So there's nine member companies. There are four non voting member- non voting member committee.

So there are four non voting members of the board who are appointed by the governor's office. And then the Department of Insurance sits in on our meetings. So we have a good representation I think of people when we have these discussions.

The governing committee provides oversight, but they do not make the day to day operational decisions of the Fair Plan. So those, that's why they hired me. Right. So they hold me accountable for those decisions.

So when we go to a board meeting, we report out on our results, on where we think we're going to, you know, could potentially run into issues. We talk about the legislation that's pending and how we think that might affect us, and we get approval on our- on our budget.

Basically, they approve our budget and some of our subcommitee minutes. That's their role. So they- they are in an advisory capacity. And I think the experience they have with the industry provides a lot of value for me in terms of an advisory capacity. And that's how we use the board. So for me, it's been very effective.

Alright. Any more questions? No? Okay. Well, thank you again. We always appreciate having you come before us and I know you're very thoughtful and really try and be transparent and we appreciate you continuing to engage with us. So at this time, I'd like to open it up for public comment.

If you could come forward, state your name, affiliation, and provide a brief remark. And we're going to keep remarks to two minutes, please.

Madam Chair, members, Dan Dunmoyer with the California Building Industry Association. First, I just want to thank you for continuing to have these informational hearings. I think this is very important for the public and the capitol region to hear what's going on. Just a couple things,

historically, having been around a long time on insurance. You should look at the Fair Plan as an indicator on the health of the regular market. The more it grows, the more unhealthy the regular market is. So although Ms. Roach is doing an amazing job, she's overseeing the fastest growing insurance company in California.

It should be a big red flag to all of you in leadership that the market's not working. On the extraordinary soundness. It's kind of weird for us as a building industry. We buy this product, we're using the Fair Plan product for homes that will not burn, we think. Master plan communities that will not burn.

And we hope by July 26th to use this for our condominium. So thank you for working with the department on that. But a couple of things. By definition, when you pay out a billion- when you assess insurers $1.0 billion, it's not actuarially sound. That's just a simple mathematical statement.

So the other thing is, if your rates are lower than the admitted market, which is full coverage, it's not actuarially sound. The Department of Insurance did approve those rates for State Farm, Farmers, All State. And so those were actuarially sound rates for them. By definition, the Fair Plan should be more expensive.

So those are just some kind of key indicators. Last thing I'll say is we do strongly appreciate Madam Chair, you're in co authoring with Mr. Alvarez AB 226. We do hope that makes it to the Governor and gets signed because God forbid we have any more fires. The Fair Plan will need that.

So thank you again for this opportunity to share our views. We appreciate the efforts of the Fair Plan to help us with our condominiums, apartments and low income housing. And that's a step in the right direction. Thank you, Madam Chair.

Madam Chair, members, John Norwood, on behalf of the Independent Insurance Agents and Brokers of California, I really didn't plan on saying anything today, but I want to just reiterate the comments that have been made about the condition of the marketplace. Our members work throughout every community in California as independent agents, which means they have company appointments.

Most of our members have six to 20 company appointments. As brokers, they can completely shop the marketplace. They don't have markets today. And I mean they may, fortunately they've maintained their appointments because they're writing commercial insurance.

But with regard to homeowners insurance, maybe they have one or two markets and maybe they can submit less than five applications a month for coverage. And I think what's going on in the regular marketplace actually is a reflection of what's gone on with regard to the growth of the Fair Plan in the- the non wildfire markets.

I mean it shows the- the fact that there's a lack of a voluntary market, certainly. Secondly, the fear in the voluntary market of additional assessments from the Fair Plan because we're not going to bring these companies back as long as they think they're going to get additional assessments. Period. It shows the inadequate rate.

I mean the last rate increased 2021. I think your assessment in 2021 was you needed somewhere between a 50 and 75% rate increase. You got 15. I mean we're three years later. The risk is higher. Rates are not actuarially sound.

The other thing is under current rate, under current situations, and we have great hopes for the sustainable insurance solution, but it's not applicable right now. Under the current situation, companies can't afford their reinsurance. So they're still basically getting rid of risk where they can.

And as the insurance commissioner has used his authority to institute moratoriums 31 times in areas where they've had fires. So companies cannot non renew or cancel in those areas, which is positive for those areas. You can't not do that.

But at the same time, if you have to shed risk where you're going to shed the risk someplace else. And that's what's happening. And that's. And so people that are in Sacramento or other low risk areas, all of a sudden they get non renewed or not canceled, but usually non renewed.

And they've got to go someplace and they're going to the Fair Plan. So, you know, on depopulation, our agents and brokers can't wait to pull everybody out of the plan as soon as they can. But it's going to be a marketplace depopulation when CISC starts being used and companies can get those rate increases.

Hopefully the first thing they do is all the policyholders. They used to write for property and now are just writing the difference in condition policies. Hey, let's go back and take those out. They already have the relationship with the agent and broker. They have the information on the policy. They have everything they need to take them out.

So that's how depopulation is going to happen. That and adequate rates for the Fair Plan. Appreciate the opportunity to make a few comments. Thank you.

Thank you. Again, I'd like to thank Victoria and Armand for being here today. I'd like to thank the public for your comments. And this concludes the Assembly Insurance Oversight hearing on the Fair Plan.