In response to the raging fires in Los Angeles County, and the threatened exodus of fire insurance companies, state legislators introduced Assembly Bill 226 on January 9 2025, a proposed law named the FAIR Plan Stabilization Act.

The California FAIR Plan Association is a joint reinsurance association in which all insurers licensed to write basic property insurance participate in administering a program for the equitable apportionment of basic property insurance for persons who are unable to obtain that coverage through normal channels.

Existing law requires the association’s plan of operation and any amendment to the plan to be approved by the Insurance Commissioner. Existing law establishes the California Infrastructure and Economic Development Bank and authorizes it to issue bonds to provide funds for the payment of costs of a project for a participating party or upon request by a state entity.

This bill would authorize the association, if granted prior approval from the commissioner, to request the California Infrastructure and Economic Development Bank to issue bonds, and would authorize the bank to issue those bonds to finance the costs of claims, to increase liquidity and claims-paying capacity of the association, and to refund bonds previously issued for that purpose.

The bill would specify that the association is a participating party and that financing all or any portion of the costs of claims or to increase liquidity and the claims-paying capacity of the association is a project for bond purposes.

The bill would authorize the bank to loan the proceeds of issued bonds to the association, and would authorize the association to enter into a loan agreement with the bank and to enter into a line of credit agreement with an institutional lender or broker-dealer.

This bill would require the association, if the above-described bonds, loan agreements, or lines of credit received the prior approval of the commissioner, to assess members in the amounts and at the times necessary to timely pay in full all obligations of the association with respect to those bonds, loan agreements, or lines of credit and related agreements, as specified.

This bill would declare that it is to take effect immediately as an urgency statute.

“AB 226 will alleviate some of the uncertainty that FAIR Plan policy holders may encounter as a result of this tragedy,” said Assemblymember Lisa Calderon, a Whittier Democrat, chair of the Assembly Insurance Committee and one of the bill’s authors, in a statement reported by Courthouse News. “We remain steadfast in acting with urgency to support the impacted communities during this difficult time.

“This bill is an excellent first step, among many we must take, to stabilize California’s insurance market by protecting the FAIR Plan,” said Assemblymember David Alvarez, a San Diego Democrat and the bill’s other author, in a statement. “When disaster strikes, Californians should be able to count on their insurance coverage to pay out valid claims.”

Assembly Speaker Robert Rivas, a Hollister Democrat, announced plans for the bill on Thursday. He said many of his colleagues are in Los Angeles to help, volunteering with local efforts and ensuring people and organizations have the resources they need.

Speaking to the media, Rivas said the Assembly will introduce legislation focused on recovery efforts, as well as a bill to expedite homeowner insurance claims.