Navigating California’s Wildfire Insurance Challenge: Community Demographics and the FAIR Plan

POLICY BRIEF: Navigating California’s Wildfire Insurance Challenge: Community Demographics and the FAIR Plan 

We examine the statewide financial cross-subsidy created by California’s FAIR Plan, where all policyholders can be surcharged to cover wildfire losses concentrated in high-risk areas. This study analyzes the demographic and economic characteristics of the communities benefiting from this system, i.e. communities where a significant portion of properties are insured through the FAIR Plan and where wildfire risk is high.

We find that high-risk, high-dependency communities are, on average, older, less racially diverse, and have higher rates of homeownership than the rest of California. We also find that while some of these communities are less affluent, the most heavily reliant group is not economically disadvantaged and has incomes that meet or exceed the state average.

These findings suggest that the current untargeted, statewide surcharge may not be the most equitable method for distributing wildfire-related costs. The demographic and economic profile of the beneficiary communities raises questions about who bears the cost versus who benefits. Policy solutions that focus on proactive risk reduction rather than socializing costs after a disaster can address concerns about equity of the cross-subsidy mechanism that is part of the FAIR Plan.

By scaling up home hardening programs and strengthening mitigation incentives, the underlying risk can be reduced. This would enable more properties to secure private insurance and lessen the need for statewide FAIR Plan subsidies.

This is a CPL-hosted project, which means that CPL provides the infrastructure (such as our Secure Data Hub) to make this project possible, however, the research team is ultimately responsible for the research design, methodology, and results.

Suggested Citation: Hilbig, H., Hen, L., Macaraeg, M. (2025). Navigating California’s Wildfire Insurance Challenge: Community Demographics and the FAIR Plan. California Policy Lab, University of California. https://capolicylab.org/navigating-californias-wildfire-insurance-challenge-community-demographics-and-the-fair-plan/