Comment by dlcarrier

Comment by dlcarrier 3 months ago

6 replies

California's insurance policies are more strange, due to proposition 103, passed in 1988.

It creates a condition where the state can prohibit insurers from selling to residents, if it doesn't like their prices, which has recently lead to a lot of insurers no longer selling in the state, as construction prices in the state have risen significantly faster than inflation, leading to insurance premiums that the state doesn't like.

Residents who no longer have any insurers available can buy insurance from the state, but its far more expensive than the plans it rejected from private insurers.

hintymad 3 months ago

> Residents who no longer have any insurers available can buy insurance from the state, but its far more expensive than the plans it rejected from private insurers

Sounds like a state-run racketeering business

  • dlcarrier 3 months ago

    No, it's likely running at a loss.

    • loeg 3 months ago

      In fact, a huge loss, which it plans to subsidize by... billing any insurers remaining in the state.

      > As of last Friday, the FAIR Plan had just $377 million available to pay claims, according to the office of Senator Alex Padilla, Democrat of California. It’s not yet known how much in claims the plan will face but the total insured losses from the fires so far has been estimated at as much as $30 billion.

      > If the FAIR Plan doesn’t have enough money to pay all its claims, it can rely on something called reinsurance — effectively, insurance for insurers in case their losses exceed a certain amount.

      > Senator Padilla’s staff said the plan has $5.75 billion in reinsurance available.

      Notably, $5.75B is less than $30B.

      > If the FAIR Plan can’t make up its losses from reinsurance alone, it can demand money from California’s insurance companies to make up the difference.

      https://www.nytimes.com/2025/01/14/climate/californias-insur... / https://archive.is/Xg6s9

      California couldn't set up a more broken insurance market if it tried.

      • rawgabbit 3 months ago

        So many homeowners who lost everything will find out their California backed insurance is worthless. California will ask for a federal bailout?

        • loeg 3 months ago

          California's a rich state; $30B isn't totally beyond what they could extract from local industry in a year. I'm sure they'd prefer to be bailed out, but as a non-California taxpayer, I'd want any federal bailout to come with conditions that would help prevent recurrence: restricting building in dangerous areas, requirements around relaxing SFH zoning in safe areas so that developers can infill housing and meet CA's housing needs.