California Insurance Regulations  Update

July 28th, 2025

As an HOA Insurance professional, I am certainly familiar with the California Fair Plan (CFP) however in my twenty years in the industry, I have only seen a rare and few properties rely on it for insurance solutions. This is due to a few factors. The CFP had a policy capacity of just over $3,000,000 prior to recent history and most of our HOA clients’ properties far exceeded that amount. If a property wasn’t eligible for one of the California admitted insurance carriers’ appetites, there was often a slew of fellow admitted carriers that could offer less strict underwriting requirements. And if the occasional property couldn’t land a quote, the surplus lines carriers were often a familiar and viable option. So, reliance on the CFP was minimal. Until now.

Now, with The Department of Insurance (DOI) applying pressure to the CFP to increase their capacity limits and the CFP obliging (up to $20,000,000 per building, $100,000,00 cap beginning July 26), admitted insurance carrier options dwindling, mortgage guidelines tightening and wildfire raging on, more properties have felt forced to give the policy some thought.

And thought is key and not something I suggest lightly when considering the insurance option of last resort. The California Fair Plan has been and remains a last resort option and for good reasons. The policy itself comes with many exclusions, the biggest of which in my opinion is water, and therefore requires an additional policy known as Wrap or DIC to put back some of the missing coverage.

Don’t assume CFP is better than surplus lines/excess market (E&S) options. Unfortunately, even The California Department of Insurance, an agency charged with overseeing our state insurance regulations and protecting consumers, produces written materials suggesting the CFP is a preferable option to surplus lines. In most cases, this is far from the truth. For the last few years especially, the alternative market has helped our clients protect their communities, meet CC&R requirements, adhere to mortgage lender demands and ultimately insure communities for the risks that keep most of us awake at night. Albeit, the premiums in these markets are different from the somewhat stagnant pricing of the admitted market for the last few decades, however, while that market recovers and (hopefully) makes its’ entrance back into the California common interest development arena, I am grateful for our E&S partners.

Back to The Fair Plan; Have you called the California Fair Plan lately? Phone wait times have been as long as four hours for some of us, endorsing policies is nearly impossible and getting policy questions answered, daunting. We are also having to combat misinformation regarding the CFP, one of which is that The CFP is a government run program. This is incorrect. The California Fair Plan relies on funds from the various admitted insurance carriers that make up the California insurance marketplace. Which leads many to worry about the financial solvency of the CFP should another largescale loss occur.

Some silver lining for those associations that turned to E&S at the start of this hard insurance market; E&S rates are on average remaining steady for those properties that have not experienced an insurance claim nor any significant changes to their operations. Secondly, our motivation is to get you out of the E&S market and back with admitted carriers as soon as possible. We suggest working with your insurance professional on making good on maintenance obligations, investing in the repair and replacement of aging components and doing your part to mitigate risk. These efforts can land you back with a preferred policy sooner. Lastly, we are seeing new insurance options pop up for our California clients and those of us with an ear to the ground and real proficiency in the HOA Insurance marketplace, already have established partnerships with these companies and programs.

Whether you are insured through standard carriers, E&S or the CFP, accuracy, education, advocacy and service relies upon a component and ethical insurance broker. I see a lot of “interesting” insurance situations come across my desk and while this is a time that requires creativity, flexibility and leadership, this is no time to tolerate bad actors taking advantage of the insurance crisis we face. We have seen several brokers willingly and artificially lower rebuild costs in order to obtain a CFP policy at or under $20,000,000. Something to keep in mind is co-insurance and the likelihood of no or reduced coverage afforded should a property violate the co-insurance threshold. It is imperative based on policy verbiage and restrictions that the total amount of insurance be within the co-insurance amount placed (70% to 100%).

Media has not been a friend to California insurance consumers. With such an emphasis on admitted carriers pulling away from the market, finger pointing and name calling, it’s hard for consumers to know exactly what to believe. Ultimately though, the California insurance market is one of the most sought after and lucrative if and only if insurance carriers charge appropriate premiums based on true risk. For that to happen it is my belief that great reform needs to take place within the Department of Insurance, making necessary policy and premium changes a more streamlined process. In addition, fire mapping and risk analysis must be the most accurate and informative based on real data and current mitigation efforts. And lastly, insureds need to do their part to stay insured with or gain back acceptance to the standard insurance market. Whether it’s replacing problematic electrical panels, roof repair and/or replacement, brush clearing, or membership education, communities need to be willing and able to comply with underwriting requirements.

As we continue to navigate this unprecedented insurance market, rely on honest transparent professionals to guide your awareness and drive your efforts. Together, we can see to it your property is placed with the most affordable and necessary coverage available. And remember, the CFP is the insurance of last resort for good reason. If there are other options on the table, work with your preferred insurance professional, to make the most informed decisions possible.