BETTER. GOOD MORNING, EVERYONE.
UM WELCOME TO THE ASSEMBLY
INSURANCE COMMITTEE'S OVERSIGHT
HEARING ON A CALIFORNIA FAIR
PLAN. THIS IS OUR FIRST HEARING
OF 2024. AND I WANT TO TAKE A
MOMENT TO WELCOME OUR NEW
MEMBERS. UM WHO ARE NOT HERE YET
, BUT I'M GOING TO WELCOME THEM
ANYWAY. UH AND SO I'D LIKE TO
WELCOME ASSEMBLYWOMAN BLANCA
RUBIO, ASSEMBLYWOMAN REBECCA
BARER KHAN, ASSEMBLYWOMAN COIE,
PETRI NORRIS. AND ASSEMBLY
MEMBER ALVAREZ. OH AN
ASSEMBLYMAN PATTERSON. SO
WELCOME TO THE INSURANCE
COMMITTEE. TODAY'S HEARING IS A
SEQUEL TO THE HEARING WE HAD
LAST YEAR ON THE CALIFORNIA FAIR
PLAN. AND SO I WOULD REALLY MY
HOPE FOR TODAY IS THAT, UH,
EVERYONE LEAVE THIS HEARING
KNOWING THE PURPOSE OF THE FAIR
PLAN, THE CURRENT STATE OF THE
FAIR PLAN AND FOR US TO GET AN
IDEA OF WHAT THE FUTURE HOLDS
FOR THE FAIR PLAN. UH,
UNFORTUNATELY, SINCE OUR LAST
HEARING THE NUMBER OF FAIR PLAN
POLICY HOLDERS HAS GROWN
SIGNIFICANTLY. SO IF A HOMEOWNER
OR BUSINESS RECEIVES A NON
RENEWAL NOTICE, UH, IT'S FAIR TO
SAY THAT THEIR NEXT STOP IS
OFTEN THE CALIFORNIA FAIR PLAN.
I'D LIKE TO THANK THE CALIFORNIA
FAIR PLAN FOR BEING THERE IS OUR
SAFETY NET. THANK YOU FOR
STEPPING IN WHEN NEEDED IN
TAKING CALIFORNIA'S RISKIEST
PROPERTIES. OUR HOMEOWNERS AND
BUSINESSES NEED TO HAVE MORE
INSURANCE CHOICES AND SHOULD
ULTIMATELY, UH, HOPEFULLY BE
RETURNING TO THE ADMITTED
MARKET. FORTUNATELY THE
INSURANCE COMMISSIONER ANNOUNCED
HIS SUSTAINABLE INSURANCE
STRATEGY LATE LAST YEAR AND IS
IN THE PROCESS OF IMPLEMENTING
HISTORIC REFORMS. THE GOAL OF
THE SUSTAINABLE INSURANCE
STRATEGY IS TO STABILIZE
CALIFORNIA'S INSURANCE MARKET.
REFORMS INCLUDE DEPOPULATING THE
FAIR PLAN THROUGH RESIDENTIAL
AND COMMERCIAL CLEARINGHOUSE
PROGRAMS. I LOOK FORWARD TO
HEARING ABOUT HOW THE
RESIDENTIAL CLEARING HOME
CLEARINGHOUSE PROGRAM IS WORKING
AND HOW THE FAIR PLAN WILL USE
THESE PROGRAMS TO DEPOPULATE. AT
THIS TIME. UM, WELL, ACTUALLY, I
DON'T HAVE ANY NEW MEMBERS HERE
SO WELL, WOULD YOU LIKE TO MAKE
A WORK OF OPENING STATEMENT? ANY
OF YOU. MR GIBSON. ALL RIGHT.
YOU'RE WELCOME. SO AT THIS POINT
IN TIME, I'D LIKE TO WELCOME UH
VICTORIA ROACH, PRESIDENT OF THE
FAIR PLAN, AND ARMAND FELICIANO,
GENERAL COUNSEL OF PUBLIC POLICY
ADVOCATES. GOOD MORNING, MADAM
CHAIR MEMBERS OF THE COMMITTEE.
UH, WE APPRECIATE THE
OPPORTUNITY TO TESTIFY TODAY AND
PROVIDE THE STATUS OF THE FAIR
PLAN. OUR GOALS TODAY INCLUDE
THE FOLLOWING NUMBER ONE PROVIDE
HISTORICAL CONTEXT AND, UH,
DISCUSS THE EVOLUTION OF THE
FAIR PLAN NUMBER TWO PROVIDE
DATA THAT WE BELIEVE IS GONNA BE
HELPFUL FOR POLICYMAKERS AND
STAKEHOLDERS AS WE DISCUSSED THE
STATUS OF THE FAIR PLAN. AND
FINALLY, JUST REALLY, TO ANSWER
QUESTIONS AND CONCERNS YOU MAY
HAVE ABOUT, UH, THE EXPANSION OF
THE FAIR PLAN, AND, UM SO WITH
THAT I DO WOULD LIKE TO TURN IT
AND INTRODUCE VICTORIA ROACH
FREEDOM PLAN, PRESIDENT THANK
YOU, ARMAND. GOOD MORNING, MADAM
CHAIR MEMBERS OF THE INSURANCE
COMMITTEE. UH, I'M VICTORIA
ROACH. I'M OF THE CALIFORNIA
FAIR PLAN. I'VE BEEN IN MY
POSITION FOR ABOUT TWO YEARS NOW
. UM AND I'VE BEEN WITH THE FAIR
PLAN JUST OVER FOUR YEARS BUT
HAVE 35 YEARS IN THE INSURANCE
INDUSTRY WORKING IN THE
VOLUNTARY MARKET PRIOR TO COMING
TO THE FAIR PLAN. UM, AS WE GO
THROUGH TODAY, AS ARMANDA STATED
, WE'LL GIVE YOU SOME HISTORICAL
BACKGROUND. TALK ABOUT WHAT
MADAM CHAIR ASKED US IN TERMS OF
THE CURRENT STATE OF THE FAIR
PLAN AND WHERE THINGS ARE GOING
AND WHAT WE'RE WORKING ON TODAY.
I WANT TO ASSURE THE COMMITTEE
THAT WE REMAIN COMMITTED TO OUR
MISSION. OUR GOAL IS TO BE
AVAILABLE AND AN OPTION FOR
CALIFORNIA CONSUMERS WHO CANNOT
FIND, UH, INSURANCE IN THE
VOLUNTARY SURPLUS LINES MARKET.
SO IF WE MOVE TO THE FIRST SLIDE
, JUST GIVE A LITTLE BIT OF, UH,
HISTORY ON THE CALIFORNIA FAIR
PLAN. UH, THE FAIR PLAN WAS
ESTABLISHED BY THE LEGISLATURE
IN THE 19 SIXTIES FOLLOWING THE
WATTS RIOTS WHEN PEOPLE IN THE
INNER CITIES COULD NOT FIND
INSURANCE. UM WE WERE THEN, UM,
EXPANDED TO COVER BRUSH AREAS,
AND, UM, FINALLY, NOW WE OFFER
IN THE ENTIRE STATE. ANYONE WHO
CAN'T GET INSURANCE. UM OUR
GOALS ARE VERY SIMPLE AS STATED
IN THE LEGISLATURE, SIMPLE IN
TERMS OF EASY TO UNDERSTAND, UH,
HER GOALS ARE TO STABILIZE THE
MARKET TO ASSURE AVAILABILITY OF
THE MARKET AND TO ENCOURAGE
MAXIMUM USE OF THE MARKET. WE
ARE WE ARE A RESIDUAL MARKET,
WHICH MEANS WE ARE THE LAST
RESORT, SO THERE'S 100 AND 18
PLUS, UH, INSURERS IN THE
VOLUNTARY MARKET IN THE STATE OF
CALIFORNIA. NOW I WON'T SAY
THERE'S 100 AND 18 PLUS INSURERS
AVAILABLE TO CONSUMERS TODAY,
BUT THERE ARE INSURERS IN THE
STATE OF CALIFORNIA THAT'S
SUPPOSED TO BE WHERE CONSUMERS
GO FIRST. IF THEY CAN'T FIND
INSURANCE THERE, THEY'RE
SUPPOSED TO GO TO ONE OF THE
100. TO SURPLUS LINES CARRIERS
IN THE STATE. AND FINALLY, IF
THEY CANNOT GET INSURANCE THERE,
THEY COME TO THE CALIFORNIA FAIR
PLAN. UH UNFORTUNATELY, AS YOU
KNOW, WITH THE CURRENT STATE OF
THE MARKET, I THINK THIS IS
OFTENTIMES REVERSED BECAUSE
THERE'S NOT A LOT OF OPTIONS OUT
THERE FOR PEOPLE. AND SO, UM,
INSTEAD, THE FAIR PLAN IS
QUICKLY MOVING TO BE THE FIRST
RESORT FROM A LOT OF PEOPLE, UM,
WERE ONE OF THE LARGEST WRITERS
IN THE STATE RIGHT NOW, IN TERMS
OF NEW BUSINESS COMING IN, AND
WE'LL GO THROUGH SOME OF THOSE
NUMBERS SO YOU CAN SEE WHERE WE
STAND. UH, COMPARED TO WHERE WE
WERE A YEAR AGO, SO IF YOU GO TO
THE NEXT SLIDE, UM AGAIN FOR
CONTEXT. UM UH OR AS A REMINDER.
WE ARE NOT A STATE AGENCY AND WE
ARE NOT TAX. UH NOR STATE FUNDED
. UM, WE ARE NOT FOR PROFIT
ORGANIZATION. OUR GOAL IS TO,
UH, COLLECT MONEY PREMIUMS SO
THAT WE'RE ABLE TO PAY OUR
LOSSES ON OUR OPERATING EXPENSES
, BUT NOT TO MAKE A PROFIT. WE
ARE REGULATED BY THE LEGISLATURE
THERE STATUTE THAT REGULATES THE
SETUP. BEEN IN WHAT THE FAIR
PLAN IS RESPONSIBLE FOR, UM BUT
WE ARE NOT PART OF THE SAME
REGULATION AS THE INSURANCE
COMPANIES, AND SO THEREFORE WE
ARE NOT SUBJECT TO PROP 10
THREE. AND WE ARE AN
ASSOCIATION. MEANING WE'RE MADE
UP OF ALL CARRIERS IN THE
VOLUNTARY MARKET WHO ARE
LICENSED AND HAVE, UH, PROPERTY
BUSINESS ON THEIR BOOKS, THEIR
PART OF THE ASSOCIATION OF THE
FAIR PLAN. IT'S A NON VOLUNTARY
ASSOCIATION. UM SO THAT MEANS
THEY SHARE IN OUR PROFITS. BUT
PRIMARILY IN OUR LOSSES. IF WE
HAVE LOSSES AND CAN'T PAY, WE
TURN TO THE VOLUNTARY MARKET TO
HELP US PAY FOR THOSE LOSSES,
AND WE'LL TALK A LITTLE BIT
ABOUT HOW THAT WORKS. WE DO
ACCEPT PROPERTIES, REGARDLESS OF
WILDFIRE EXPOSURE. SO UM, WE
CAN'T MANAGE OUR EXPOSURE THE
WAY ANOTHER INSURANCE COMPANY
CAN MANAGE THEIR EXPOSURE AND
SAY WE WE'RE JUST TOO EXPOSED IN
THIS AREA. WE CAN'T AFFORD THIS.
THESE KIND OF LOSSES IN THIS
AREA. WE'RE GOING TO ENSURE OVER
HERE INSTEAD. WE DON'T WE DON'T
HAVE THE OPPORTUNITY TO DO THAT,
AS THE INSURER OF LAST RESORT
WOULD MAKE. WERE AVAILABLE TO
CONSUMERS, NÓ MATTER WHERE THEY,
UH, HOME OR BUSINESS IS LOCATED.
UM AND AGAIN WE'RE FUNDED
PRIMARILY THROUGH THE POLICIES
THAT WE SELL TO OUR
POLICYHOLDERS. EX. WE MOVE ON TO
THE NEXT SLIDE. UM, SO WHERE ARE
WE TODAY? UM AND WHERE ARE WE
FOCUSED BECAUSE OF THE WAY THE
CURRENT MARKET IS SET UP. SO
AGAIN, WE'RE COMMITTED TO
ENSURING THAT PEOPLE HAVE
OPTIONS. AND THE OPTION IS
CALIFORNIA FAIR PLAN RIGHT NOW,
FOR A LOT OF CUSTOMERS COMING IN
UM, WE ARE COMMITTED TO ENSURING
THAT WE'RE MEETING CONSUMER
NEEDS. WE'RE IN CONSTANT
CONVERSATIONS WITH STAKEHOLDERS.
LEGISLATORS THE DEPARTMENT OF
INSURANCE TO LOOK AT WHAT ARE
THE CONSUMER NEEDS? AND HOW DO
WE BEST MEET THOSE NEEDS? UM,
HOW DO WE SUPPORT A FRAGILE
INSURANCE MARKET, RIGHT? OUR
GOAL IS NOT TO CONTINUE TO GROW
AND TO TAKE ON MORE RISK. BUT
HOW DO WE, UH, PROVIDE THE
STABILITY SO THE MARKET CAN
STABILIZE SO THAT THE RISK CAN
GO BACK OUT INTO THE VOLUNTARY
MARKET WHERE THEY BELONG. AND
AGAIN THAT'S DONE THROUGH
COLLABORATION WITH PEOPLE LIKE
YOURSELVES. THE, UH èC Dð I AND
OTHER STAKEHOLDERS IN THE
INDUSTRY. NEXT SLIDE. SO LET'S
LOOK, THIS IS THE THIS IS THE
KEY SLIDE. HERE'S OUR NUMBERS
SLIDE, RIGHT? WHAT ARE WE DOING?
SO, UM WE HAVE. AS OF THE END OF
, UH, DECEMBER WE HAD ABOUT A
350,000 POLICIES, UM, WERE
PROBABLY UP AROUND THREE 170,000
POLICIES TODAY OR THREE 175,000
POLICIES. TODAY WE CONTINUE TO
GROW AT A VERY RAPID RATE. UM
WHERE WE ARE STILL RECEIVING
NEARLY 1000 APPLICATIONS EVERY
WORK DAY, SO THAT TRANSLATE TO A
TO ABOUT 20 TO 22,000
APPLICATIONS A MONTH FOR
INSURANCE THAT WE RECEIVE. UM,
WHEN WE IN MAY SO BEFORE THE
MARKET STARTED, REALLY RESTRICT,
UH, WE HAD ABOUT 9000 REGISTERED
BROKERS WITH THE CALIFORNIA FAIR
PLAN. TODAY WE HAVE ALMOST
55,000. REGISTERED BROKERS
LICENSED èC, S¼, R, S¼ AND
PRODUCERS IN OUR SYSTEM WRITING
BUSINESS. UM IT'S BEEN A
TREMENDOUS INCREASE IN A VERY
SHORT PERIOD OF TIME. UM WE
HAVE, UM TWO COURT TO ADDRESS
THAT WE GREATLY INCREASED OUR
STAFF AS YOU CAN IMAGINE, TO TRY
TO MEET THE NEEDS OF THE BROKERS
AND CONSUMERS THAT ARE COMING
TO, UH, THE FAIR PLAN. THOSE
NUMBERS CONTINUE TO GROW, UM
LAST MONTH ALONE IN THE MONTH OF
FEBRUARY, WE WROTE OVER 15,000
NEW BUSINESS POLICIES IN ONE
MONTH. I THINK THAT'S PRETTY
SURE THAT'S A RECORD FOR US. UM,
BUT IN THE BUSINESS JUST KEEPS
COMING IN. THAT'S A MIX OF, UH,
PERSONAL LINES AND COMMERCIAL,
BUT THE MAJORITY OF OUR BUSINESS
REMAINS TO BE, UM, PERSONALIZED.
ALTHOUGH WE HAVE DOUBLED IN
COMMERCIAL POLICIES, IT'S STILL
A SMALL PORTION OF OUR BUSINESS.
UM, BUT CONTINUING TO GROW. IF
YOU LOOK AT THE NEXT SLIDE, UM
THIS TALKS A LITTLE BIT ABOUT
WHAT WE WERE WHAT I WAS TALKING
ABOUT IN TERMS OF CONCENTRATION
OF RISK. SO THE PICTURE AT THE
BOTTOM SHOWS AT THE FAIR PLAN.
WE TAKE ALL COMERS, BASICALLY AS
LONG AS THEY MEET THE VERY BASIC
OF UNDERWRITING GUIDELINES.
REGARDLESS OF WHERE THEY'RE
LOCATED, WE WILL INSURE THEM
EVEN IF WE INSURE THE FOUR
DWELLINGS ALL THE WAY AROUND
THEM. WE'RE GOING TO ENSURE THAT
RISK NÓ MATTER WHAT THE WILDFIRE
SCORE IS, THE VOLUNTARY MARKET
HAS A LITTLE MORE LEEWAY. IN
KIND OF PICKING AND CHOOSING. SO
WHEN WE TALK WHEN WE LOOK AT
THIS, WHAT IT TRANSLATES TO IS
WE HAVE AS MADAM CHAIR TALKED
ABOUT A HIGH RISK POOL, A HIGH
RISK POOL. SHOULD TRANSLATE TO
HIGHER RATES. BECAUSE OUR RISK
IS HIGHER IN OUR CONCENTRATION
OF RISK IS HIGHER. SO UM, YOU
WILL HEAR PEOPLE TALK ABOUT, UM,
THE HIGH RATES OF THE CALIFORNIA
FAIR PLAN, AND I WILL TELL YOU
THAT, IN THE HIGHEST OF WILDFIRE
AREAS ARE RATES ARE HIGH. I
WON'T SAY THEY'RE HIGHER THAN
EVERYBODY ELSE, BUT THEY ARE
HIGH. UM WE HAVE SEVERAL AREAS
WITHIN THE STATE THAT OUR RATES
ARE STILL LOWER THAN THE
VOLUNTARY MARKET, WHICH PRESENTS
A DIFFERENT PROBLEM. AND AS THE
MARKET STABILIZES, WE'LL NEED TO
ADDRESS THAT PROBLEM SO THAT
PEOPLE COMFORTABLE MOVING FROM
THE FAIR PLAN BACK OUT INTO THE
VOLUNTARY MARKET. THE, UH KEY
THAT I'LL, UM FOCUS YOU ON ON
THIS PAGE IS THE FINAL BULLET
POINT HERE. SO AS OF DECEMBER,
31ST WE HAD OVER $311 BILLION OF
EXPOSURE THROUGHOUT THE STATE.
SO WHEN YOU LOOK AT THE NUMBER
OF POLICIES AND YOU THINK, OK,
THREE 173,000 POLICY HOLDERS,
BUT THEN YOU LOOK AT THE
EXPOSURE IN THE STATE. THESE ARE
HUGE NUMBERS, ESPECIALLY FOR
RESIDUAL MARKET. UM, AND THEY
CONTINUE TO GROW. SO THAT WAS AT
THE END OF DECEMBER. WE GREW
ANOTHER, UH, $10 BILLION IN
EXPOSURE IN JANUARY IN ANOTHER
$15 BILLION OF EXPOSURE IN
FEBRUARY, SO THE NUMBERS JUST
CONTINUE TO CLIMB, WHICH IS A
CONCERN. AS THOSE NUMBERS CLIMB.
OUR FINANCIAL STABILITY COMES
MORE IN QUESTION, AND WE THEN
GET CLOSER TO AN ASSESSMENT OF
THE MARKET. SHOULD WE KNOCK ON
WOOD HAVE A CATASTROPHE BECAUSE
WE CAN'T SUPPORT THOSE NUMBERS.
RIGHT AGAIN. WE'RE WE'RE NOT FOR
PROFIT. WE DON'T HAVE A LOT OF
MONEY SITTING AROUND. UM OUR
RATES ARE NOT ADEQUATE, AND
WE'LL TALK ABOUT THAT IN A
MINUTE. BUT OUR RATES ARE NOT
WHERE THEY NEED TO BE. AND SO IF
WE HAVE A MAJOR EVENT WE'RE
GONNA LOOK TO THE VOLUNTARY
MARKET WHO IS ALREADY IN A
PRECARIOUS US IS THAT MORE WE
GROW, THE MORE WE EXPAND, THE
MORE OF THAT BECOMES A REALITY.
OKAY SO LET'S LOOK AT THE NEXT
SLIDE JUST GIVES YOU AN IDEA OF
WHERE THAT GROWTH IS. AND WHEN
WE TALK ABOUT CONCENTRATION OF
RISK, THIS GIVES YOU AN IDEA.
THESE CIRCLES IN THE BLUE IT'S A
QUARTER CIRCLE. IT'S THE BOTTOM
CORNER OR THE BOTTOM. QUADRANT
OF THE CIRCLE. IT'S SEVEN MILES
FROM THE TIP OF THE CENTER OF
THE CIRCLE TO THE OUTSIDE OF THE
CIRCLE. WE LOOK AT IT THOSE RISK
CONCENTRATIONS IN THAT BLUE AREA
IN THAT SOUTHWEST CORNER,
BECAUSE THAT'S HOW THE WIND
BLOWS. SO THAT'S HOW THE FIRES
TRADITIONALLY MOVE, SO WE KIND
OF LOOK AT OUR CONCENTRATION OF
RISK LIKE THAT. UM THESE ARE THE
FIVE HIGHEST CONCENTRATIONS OF
RISK IN NORTHERN CALIFORNIA AND
THE FIVE HIGHEST CONCENTRATION
OF RISKS IN SOUTHERN CALIFORNIA.
THEY'RE NOT THE 10 HIGHEST IN
THE STATE. JUST TO BE CLEAR.
WE'RE TRYING TO BREAK THE STATE
UP AND LOOK AT IT. UM OUR
HIGHEST CONCENTRATION OF RISK
CONTINUES TO BE AN ARROWHEAD. I
THINK THE LAST LATEST NUMBER I
SAW WAS $8.5 BILLION OF RISK IN
EXPOSURE IN LIKE ARROWHEAD. I
WANT TO POINT OUT THAT WE DO NOT
HAVE THE FULL MARKET. IN LIKE
ARROWHEAD. WE'RE AT ABOUT 50%
MARKET SHARE LOOKING AT THE
NUMBER OF PROPERTIES. SO THERE
ARE OTHER INSURERS WHO ENSURING
PROPERTIES IN LAKE ARROWHEAD. UM
BUT THAT 8.5 BILLION REPRESENTS
ABOUT HALF OF WHAT'S OUT THERE.
UM THE OTHER THING TO TAKE INTO
CONSIDERATION IS WHEN YOU LOOK
AT THE AREAS LIKE BIG BEAR CITY,
BIG BEAR LAKE, IF YOU KNOW THE,
UM THE GEOGRAPHY OF THE STATE,
WHICH I'M GETTING VERY FAMILIAR
WITH. UM THOSE ARE ON TOP OF
EACH OTHER. RIGHT SO GOOD FOOD.
WE HAVE A FIRE IN ONE AREA. IT'S
GOING TO SPREAD TO THESE OTHER
AREAS AND THE WINDS. THE WINDS
IN THOSE AREAS WILL PICK THAT UP
AND THE DRY FOREST CONDITIONS
AND THOSE FIRES ARE GOING TO
SPREAD. SO EVEN THOUGH THE
CONCENTRATION WE'RE LOOKING AT
KIND OF BY LOCATION A LOT OF
THOSE WHEN YOU LOOK AT THEM OR
ON TOP OF EACH OTHER IN TERMS OF
AREAS. UM WE ARE GROWING
SUBSTANTIALLY IN NORTHERN
CALIFORNIA. I WILL SAY IN THE
LAST MONTH OR SO IT'S LEVELED
OUT A LITTLE BIT. WE'RE GETTING
JUST AS MUCH NEW BUSINESS IN
SOUTHERN CALIFORNIA NOW. BUT THE
FIRST FEW MONTHS OF THE
TIGHTENING MARKET, WE STARTED
GETTING A LOT OF BUSINESS COMING
IN FROM NORTHERN CALIFORNIA,
AND, UM YOU CAN SEE THAT HERE.
TREKKIE HAS GROWN 42% IN
EXPOSURE YEAR OVER YEAR FROM
2022. UM SO IF WE MOVE TO THE
NEXT SLIDE IS THIS YOURS OR MINE
? THIS IS MINE. SORRY UM, SO
WHEN WE TALK ABOUT FINANCIAL
STABILITY, RIGHT WE'RE LOOKING
AT, UM WE'RE LOOKING AT REDUCING
THAT RISK OF ASSESSMENT. WE'RE
LOOKING AT THE ABILITY FOR THE
FAIR PLAN TO PAY FOR ITS OWN
LOSSES, UM OR THE MAJORITY OF
THOSE LOSSES IN TIME OF, UM
CATASTROPHE SO THAT WE CAN SERVE
THE NEEDS OF OUR CONSUMERS AND
PROTECT THE STABILITY OF THE
VOLUNTARY MARKET AT THE SAME
TIME. UM ARE RATES AGAIN ARE
FILED AND APPROVED BY THE
DEPARTMENT OF INSURANCE. UM WE
ARE, UM BY STATUTE. REQUIRED TO
HAVE ACTUALLY SOUND RATES. SO
WHAT THAT MEANS IS ARE THE
PREMIUM THAT WE'RE TAKING IN.
SHOULD BE ENOUGH TO COVER OUR
EXPENSES AND ARE PROJECTED
LOSSES. UM AS PART OF OUR
MISSION TO CREATE STABILITY IN
THE MARKET AND REDUCE THE RISK
OF ASSESSMENT. THE FAIR PLAN
GOES OUT EVERY YEAR AND BUYS
REINSURANCE, SO WE GO OUT AND
BUY INSURANCE SO THAT IF WE HAVE
LOSSES THAT WE DON'T HAVE THE
MONEY TO COVER, WE HAVE
INSURANCE WE CAN GO TAP INTO
BEFORE WE HAVE TO GO TO THE
VOLUNTARY MARKET AND ASKED FOR
MONEY. UM AS YOU CAN IMAGINE
REINSURANCE FOR US IN THE RAIN
IN THE MARKET IS EXPENSIVE. AND
IT'S ONE OF OUR BIGGEST
EXPENSES. UM WE HAVE BEEN IN
DISCUSSIONS WITH THE DEPARTMENT
OF INSURANCE BECAUSE TODAY THEY
DO NOT ALLOW US TO INCLUDE THAT
NET COST OF REINSURANCE IN OUR
RATES, WHICH MEANS OUR RATES ARE
NEVER ACTUALLY SOUND BECAUSE ALL
OF OUR EXPENSES ARE NOT INCLUDED
IN THOSE IN THAT RATE, MAKING.
UM I WILL TELL YOU WE ARE IN
DEEP IN DISCUSSIONS WITH THEM
RIGHT NOW ABOUT HOW DO WE CHANGE
THAT? HOW DO WE MAKE IT WORK SO
THAT WE CAN INCLUDE THE NET COST
OF REINSURANCE ARE RATES. WE'VE
PROVIDED THEM A LOT OF DATA THAT
THEY'VE ASKED FOR. WE'VE HAD
MEETINGS TO TALK ABOUT OUR
REINSURANCE STRUCTURE. SO UM,
WE'RE HOPING TO MOVE THAT
FORWARD, ASSUME TO BE ABLE TO
GET OUR RATES CLOSER, WHERE THEY
NEED TO BE. WE ARE AUTHORIZED BY
STATUTE TO BUY REINSURANCE. IT'S
JUST WHETHER OR NOT WE CAN
INCLUDE IT IN OUR RATE, MAKING
SIMILAR TO THE PRIVATE MARKET
AND DISCUSSIONS THEY'RE HAVING
WITH THE DEPARTMENT. WITH THAT I
WILL TURN OVER TO ARMAND TO GIVE
A LITTLE BIT OF BACKGROUND. NEXT
SLIDE, PLEASE. SO THE
LEGISLATURE DID STEP IN IN THE
MID NINETIES. UH REGARDING FELT
BOUND RATES, ASSESSMENTS AND THE
ISSUE OF SUBSIDY SUBSIDIZING
THEIR FAIR PLAN. UH, LOOK
CONTEXT IN THE MID 19 NINETIES.
THE FAIR PLAN DID ASSESS THAT,
UH, VOLUNTARY MARKET. I THINK
THE AMOUNT WAS 206 162 $116
MILLION THE LEGISLATURE
RESPONDED. A B 1754 AND WHAT
WITH THE WHOLE QUOTE, BUT I
THINK THE LAST SENTENCE REALLY
PROVIDES THE RATIONALE FOR THAT
BILL AT THE TIME, WHICH IS, UH,
FAILED PANELS SHOULD HAVE
ADEQUATE RATES TO MAKE SURE
THEY'RE FINANCIALLY SOLVENT. AND
NUMBER TWO TALKS ABOUT THE
INDIRECT TAX, UH, THAT THE FAIR
PLAN. UM THE ASSESSMENT FROM THE
FAIR PLAN AND HOW THAT COULD BE
AN INDIRECT TAX TO EVERYONE ELSE
SUBSIDIZING THE MARKET FOR THE
FAIR PLAN. JUST PUT A LITTLE
CONTEXT AROUND THAT WHEN WE TALK
ABOUT $260 MILLION IN THE
NINETIES THAT WAS AGAINST, UM
OUR EXPOSURE AT THAT TIME WAS
AROUND 22 $23 BILLION COMPARED
TO OUR EXPOSURE NOW IS 320 PLUS
BILLION DOLLARS. SO WHEN YOU
LOOK AT THE SIZE OF THE
ASSESSMENT, KIND OF KEEP THAT IN
MIND, RIGHT? NEXT SLIDE, PLEASE.
SO THE NEXT FLIGHT IS REALLY
JUST TO KIND OF PUT IT IN
CONTEXT. A SNAPSHOT FOR EVERYONE
ELSE TO LOOK AT. SORT OF THE,
UH, THE STABILIZATION THAT FAIR
PLAN EXPANSION AND THE MARKET
RAMIFICATIONS SO YOU'LL SEE
THERE ON THE LEFT SIDE. WE PUT A
B 1754 CAUSE THAT'S THAT
ESTABLISHED BY LAW THAT THE
FAILED PLAN NEEDED TO HAVE
ADEQUATE RATES. UH AND THE
MIDDLE BULLET THERE ON THE LEFT
SIDE IS THAT THAT'S THE EFFORT
OF WHAT THEY CALL THE
CLEARINGHOUSE LEGISLATION PASSED
AND MAYBE MAYBE 3012 SP 505 LAST
YEAR AGAIN THE CONCEPT THERE
WHEN YOU HEAR THE CLEARING OUT,
IT'S A MECHANISM TO DEPOPULATE
THE FAIR PLAN. AH! AND THEN
OBVIOUSLY THE THIRD BULLET. THE
BIG ONE IS THE CALIFORNIA
DEPARTMENT INSURANCE SUSTAINABLE
INSURANCE STRATEGY. THE FAIR
PLAN IS WORKING DILIGENTLY WITH
COMMISSIONER LAURA AND HIS TEAM
ON THAT AND YOU CAN SEE THE SUB
BULLETS. DEPOPULATING AFFAIR
PLAN RATES, REINSURANCE AND
ANYTHING ELSE THAT CATASTROPHIC
MODELING ARE THE KEY COMPONENTS
IN TRYING TO STABILIZE THE FAIR
PLAN RATES. AT LEAST FOR 2024.
UH IN THE MIDDLE COLUMN, YOU'LL
SEE THAT THE FAIR PLAN
EXPANSION. UH, SB 11. 2021 AND
EVERYONE THAT WAS ALL PUBLICIZED
AND DOCUMENTED THAT FARMS
COULDN'T GET INSURANCE OR THE
FAIR PLAN STEPPED IN. THAT'S
PART OF THEIR COVERAGE
STRUCTURE. NOW 2022 A GREASED
THE LIMITS DWELLING LIMITS TO $3
MILLION. AND THEN VASTER THE
ISSUE OF $20 MILLION PER
LOCATION AGAIN CONTEXT FOR
MEMBERS THE COMMITTEE. WE HEARD
A LOT ABOUT H O S AND DEVELOPERS
NOT BEING ABLE TO GET COVERAGE
FOR THIS. LAST YEAR, THERE WAS
AN AGREEMENT BETWEEN THE FAIR
PLAN AND CD TO DO TOURNAMENT IN
DOLLARS PER LOCATION. OBVIOUSLY
THAT ISSUE IS BACK THIS YEAR. I
THINK WE'VE HEARD FROM VERY FROM
THE BUILDERS THAT THEY NEED 20
MILLION PER BUILDING SO THAT
ISSUES PENDING I WOULD NOTE THAT
THE FAIR PLAN DID SUBMIT THE
DEPARTMENT LAST SATURDAY
PROPOSAL TO BEGIN THAT
DISCUSSION ON THAT ISSUE, AND
VICTORIA'S HAPPY TO EXPAND MORE
ON THAT, AND THEN THERE'S A
PENDING LITIGATION OBVIOUSLY
CAN'T DISCUSS MORE. IT'S
SPENDING, BUT IT'S THE EXPANSION
OF THE FAIR PLANET COVER
HOMEOWNERS INSURANCE. I WILL NOW
GO BACK AND THE MARKET
RAMIFICATIONS. YES SO I THINK
IT'S UM YOU KNOW, WE TALKED A
LITTLE BIT ABOUT THIS RING
CONTINUE BECAUSE THIS IS LIKE
THE BIG ISSUE, RIGHT? SO AS WE
CONTINUE LOOKING AT MEETING
CONSUMER NEEDS, AND THAT
TRANSLATES TO EXPANDING COVERAGE
IS EXPANDING LIMITS. IT MOVES US
CLOSER TO ASSESSMENT. UM AND AS
WE GET CLOSER TO ASSESSMENT,
IT'S FURTHER UNDERMINES OUR OWN
FINANCIAL STABILITY AND THE
STABILITY OF THE MARKET. UM WHEN
WE GET TO A POINT WHERE WE HAVE
ADEQUATE RATES THAT WILL HELP.
IT'S NOT GOING TO SOLVE THE
PROBLEM, BUT THAT WILL HELP
BECAUSE AT LEAST WE'LL HAVE THE
RATES COMING IN COMMISERATE WITH
THE RISK WE'RE TAKING ON, UM AND
THEN THE BEYOND THAT RIGHT. YOU
HAVE A DOCTOR TO THE VOLUNTARY
MARKET AS TO WHAT IS THAT MEAN
TO THE VOLUNTARY MARKET AND
OTHER POLICYHOLDERS IN THE STATE
? WE'VE ALREADY SEEN A LOT OF
THAT WHERE THEY DON'T HAVE A LOT
OF CHOICES TODAY, AND A LOT OF
THEM ARE COMING TO THE FAIR PLAN
THAT WOULD HAVE NEVER COME TO
THE FAIR PLAN BEFORE UM, AS A
POINT OF REFERENCE IN, UM
SEPTEMBER, WHICH WAS THE LAST
MONTH OF OUR FISCAL YEAR, SO
SEPTEMBER OF 2023 40% OF THE
BUSINESS THAT CAME TO THE
CALIFORNIA FAIR PLAN WAS NOT IN
A WILDFIRE AREA. SO THE NEW
BUSINESS COMING IN AND THE
GROWTH WE'RE SEEING. WE'RE STILL
SEEING GROWTH IN THE WILDFIRE
AREAS AND IN THE MODERATE AND
HIGH WHAT HELLFIRE AREAS WE'RE
STILL WE'RE SEEING A LOT OF
GROWTH IN THE NO OR LOW WILDFIRE
HAZARD AREAS RIGHT NOW, AND WE
BELIEVE THAT JUST TO BE A FACTOR
OF THE MARKET AND THAT THERE'S
NOT A LOT OF OPTIONS OUT THERE
FOR PEOPLE SO WE GO TO THE NEXT
SLIDE. WE'LL TALK A LITTLE BIT
OF WHAT'S HAPPENING INTERNALLY
AT THE FAIR PLAN. UM THE FIRST
THING IS, UM IN NOVEMBER, WE
LAUNCHED A NEW APPLICATION
TECHNOLOGY SYSTEMS, SO WE
REPLACED OUR COMPUTER SYSTEM.
ANYBODY WHO'S WORKED FOR AN
INSURANCE COMPANY OR ANY LARGE
COMPANY THAT'S GOING GONE
THROUGH A COMPLETE OVERHAUL OF
THEIR COMPUTER SYSTEM KNOWS THAT
DOES NOT COME WITHOUT ITS OWN
CHALLENGES. UM, THE DECISION TO
DO THIS WAS ONE WE MADE A COUPLE
OF YEARS PRIOR. UM WE HAD BEEN
WORKING WITH THE DEPARTMENT OF
INSURANCE AND TALKING ABOUT HOW
DO WE MODERNIZE? HOW DO WE
BECOME MORE MORE ABLE TO HANDLE
THE CHANGES IN THE MARKET? WE
NEEDED A NEW COMPUTER SYSTEM.
THANKFULLY WE HAVE IT BECAUSE
I'M NOT SURE WHAT IT WOULD HAVE
HAPPENED IF WE WERE TRYING TO
WRITE ALL THIS BUSINESS ON OUR
OLD SYSTEM, BUT AGAIN, IT HAS
COME WITH ITS OWN SET OF
CHALLENGES. UM WE ARE WE
CONTINUE TO MAKE PROGRESS IN
THAT AREA. AND AS I SAID, WE
SUCCESSFULLY ISSUED 15,000
POLICIES PLUS LAST MONTH. MORE
THAN 12,000 POLICIES IN JANUARY,
SO WE ARE PUTTING BUSINESS
THROUGH. UM WE'RE NOT COMPLETELY
DONE WITH THE TRANSITION, BUT
WE'RE GETTING THERE. UM WE'VE
BEEN HOLDING EDUCATIONAL WOMEN
ARE AS TOWN HALL MEETINGS AND
EVENTS FOR BROKERS, AGENTS AND
CONSUMERS AND OTHER STAKEHOLDERS
. WE'VE SUBSTANTIALLY INCREASED
OUR STAFFING. UM AND OUR
TRAINING AND RESOURCES
INTERNALLY AND TO THE BROKERS.
SO THAT THEY CAN. WE CAN MANAGE
THROUGH THIS PROCESS. AS I SAID,
WE HAVE A LOT OF NEW BROKERS AND
LICENSED CSRS AND PRODUCERS
WRITING BUSINESS WITH THE FAIR
PLAN, WHO HAVE NEVER DONE THAT
BEFORE. UM WE IMPLEMENTED ZEST
IS A I WHICH IS OUR WILDFIRE
RISK SCORING TOOL THAT ALLOWS US
TO BETTER TAKE INTO
CONSIDERATION THE INDIVIDUAL
PROPERTY RISKS VERSUS LOCATION,
RISKS AND WHAT WE'RE DOING
RATINGS. SO IF PEOPLE ARE USING
MATERIALS THAT ARE MORE
RESILIENT TO FIRE IF THEY'RE
CLEARED THE VEGETATION AWAY,
DEPENDING ON THE GEOMETRY OF
THEIR ROOF. THEY'RE GOING TO GET
A BETTER RATE EVEN IF THEY'RE IN
THAT HIGH WILDFIRE AREA, SO IT
GIVES US BETTER TOOL TO USE TO
RATE THOSE RISKS. UM WE'VE
LAUNCHED ADDITIONAL POLICYHOLDER
PAYMENT OPTIONS, SO WE NOW HAVE
A MONTHLY PAY PLAN AND WE
IMPLEMENTED ONLINE CREDIT CARD
PAYMENT OPTIONS. UM AND MORE TO
COME AS WE WORK OUR WAY THROUGH
THIS UM, SO IF WE GO TO THE LAST
SLIDE UM, SO WHERE ARE WE TODAY?
WE ARE REALLY COLLABORATING WITH
THE DEPARTMENT OF INSURANCE TO
ON THE SUSTAINABLE INSURANCE
STRATEGY. SO WHAT REALLY AFFECTS
US ONE IS DEPOPULATION OF THE
FAIR PLAN. UH ARMAN TALKED ABOUT
THE CLEARINGHOUSE THAT WE PUT
INTO PLACE. UM OBVIOUSLY,
CLEARINGHOUSE DOESN'T WORK FOR
COMPANIES TO TAKE POLICIES FROM
US IF THEY'RE NOT WRITING
POLICIES IN THE STATE, BUT THE
IDEA IS, UM, THAT WE MAKE OUR
BOOK OF BUSINESS AVAILABLE TO
VOLUNTARY AND SURPLUS LINES
CARRIERS SO THEY CAN GO IN AND
LOOK AND PICK THE POLICIES THAT
THEY'RE WILLING TO WRITE TO MOVE
THEM OUT OF THE FAIR PLANT. THE
FAIR PLAN HAS NO CONTROL OVER
IT. WE CAN'T PUSH POLICYHOLDERS
BACK INTO THE VOLUNTARY MARKET.
IT IS SOMETHING THAT WHEN THE
MARKET STABILIZES, WE'RE GOING
TO HAVE TO LOOK AT. THERE'S UM
AN INHERENT UM OBSTACLE TO
OVERCOME IF YOU WILL, UM, WITH
THE WAY THE LEGISLATION IS SET
UP FOR THE CLEARINGHOUSE, SO WE
PROVIDE THE POLICY INFORMATION
WHERE WE GIVE THEM THE RISK
INFORMATION AND THEN WE GIVE
THEM THE BROKER INFORMATION, AND
THE COMPANY HAS TO GO TO THE
BROKER RECORD BECAUSE IT'S THEIR
CUSTOMER, UM, TO QUOTE THE
BUSINESS END QUOTE THE
POLICYHOLDER. UNFORTUNATELY IF
THAT BROKER IS NOT APPOINTED
WITH THE COMPANY WHO WANTS TO
TAKE THE BUSINESS, UM, THAT
CREATES SOMETHING THAT BROKER
AND THE COMPANY HAVE TO WORK
THROUGH. SO IT'S NOT AN EASY I
JUST AM PICKS STATE FARM. I'M
NOT STATE FARM. I CAN'T COME IN.
I CAN'T GRAB 10,000 POLICIES AND
SAY, HEY, I'M THESE ARE ALL IN
LOW RISK AREAS. I'M WILLING TO
WRITE THESE. I'M GOING TO WRITE
THESE THAT'S NOT HOW IT WORKS.
RIGHT BECAUSE THEN THEY GO TO
THE BROKERS AND BROKERS MAY OR
MAY NOT BE STATE FARM BROKERS.
RIGHT OR APPOINTED WITH STATE
FARM, SO THEY'VE GOT TO WORK
THROUGH THOSE ISSUES. SO WE HAVE
EVEN BEFORE THE STATE OF THE
MARKET CHANGED. WE HAVE VERY
LIMITED SUCCESS WITH THIS. UM I
THINK IT NEEDS MORE TIME AND
ATTENTION TO FIGURE OUT HOW THAT
WILL WORK WHEN THE MARKET
STABILIZES. UM AGAIN, ADEQUATE
RATES AND RANGE, INCLUDING THE
NET COST OF REINSURANCE WERE IN
VERY DEEP DISCUSSIONS WITH THE
DEPARTMENT ABOUT THAT NOW TO GET
OUR RATES TO AN ADEQUATE LEVEL
CATASTROPHE MODELING SEEM THING.
UM AND THEN ALL OF THIS RIGHT?
THE GOAL IS TO LEAD US TOWARDS
FAIR PLAN SUSTAINABILITY, AND WE
NEED TO BE AVAILABLE TO THE
MARKET. WHEN WE NEED TO BE
AVAILABLE. WE CAN SEE THAT RIGHT
NOW. BUT WE ALSO NEED TO BE
AVAILABLE AS THE MARKET
STABILIZES TO MAKE SURE THAT WE
ARE A STABILIZING FORCE IN THE
VOLUNTARY MARKET AND NOT
SOMETHING THAT CAUSES CONCERN
BECAUSE OF THE RISK OF
ASSESSMENT. SO I THINK THAT
BRINGS US TO THE END OF OUR
PRESENTATION HERE. THANK YOU FOR
YOUR TIME AND QUESTIONS AT THIS
POINT. THANK YOU SO MUCH. WE
APPRECIATE YOU BEING HERE NOW.
I'M GONNA CHECK WITH MY
COLLEAGUES AND SEE IF YOU HAVE
ANY QUESTIONS. A SIMILAR MEN
WOULD HAVE HAVE A NUMBER, BUT
I'LL DO MY BEST TO NOT
MONOPOLIZE THE TIME HERE, SO UM,
FIRST OF ALL, WE'RE JUST JUST
WHAT I HEARD LAST REGARDING THE
CLEARING HOUSES. ONE OF THE
PEOPLE WHO WORKED ON CREATING
THE CLEARINGHOUSE. UM I'M JUST
DISAPPOINTED TO HEAR THAT THERE
ARE CHALLENGES WITH THAT THAT
I'M JUST NOW HEARING ABOUT SO IF
THE MISCOMMUNICATION DIDN'T GET
BACK TO ME, I WILL CHECK IN MY
OWN STAFF. BUT BUT I DO RECALL
THAT THEY'RE ONE OF THE REASONS
THAT WAS WRITTEN. THE WAY IT WAS
WAS BROKERS IN THE AGENTS WANTED
IT WRITTEN A CERTAIN WAY. SO NOW
THAT'S NOT WORKING. MAYBE WE
NEED TO OBVIOUSLY NEED TO GO
BACK AND REVISIT. REVISIT THAT.
UM I WAS ALSO I WAS I WAS I WAS
STRUCK BY WHAT YOU SAID, UM,
ABOUT. FAIR PLAN RATES. UM UH
MAYBE BEING LOWER THAN WHAT
COMMERCIAL MARKET RATES WHERE
BUT ISN'T THAT KIND OF COMPARING
APPLES AND ORANGES? BECAUSE FAIR
PLAN DOESN'T HAVE FULL FULL
COVERAGE THAT A COMMERCIAL PLAN
MIGHT HAVE. SO I'M CURIOUS AS TO
CAN YOU ELABORATE A LITTLE BIT
MORE ON THAT? SURE THAT'S A
THAT'S AN EXCELLENT QUESTION.
UM, SO AND AGAIN. I'LL PREFACE
THIS WITH ANECDOTAL INFORMATION,
RIGHT. WE'RE GETTING INFORMATION
FROM THE BROKERS WHO ARE TELLING
US THIS RIGHT BECAUSE WE DON'T
HAVE ANY WAY TO COMPARE OUR
RATES. WHAT WE KNOW IS BROKERS
ARE TELLING US THAT IN SOME
AREAS THE FAIR PLAN POLICY PLUS
THE DIFFERENCES IN CONDITIONS
POLICY IS STILL CHEAPER THAN
WHAT THE VOLUNTARY MARKET IS
OFFERING A HOMEOWNERS FOR IN
THOSE AREAS AND I AND I WOULD
BELIEVE THOSE ARE THE HIGHER
BRUSH AREAS THAT WE'RE TALKING
ABOUT THERE, BUT THAT'S WE'VE
SEEN THAT UM, WHAT WE'RE SEEING
TODAY OR WHAT THE BROKERS ARE
TELLING US AGAIN, EVEN BEFORE
THE MARKET TIGHTENED UP AS MUCH
AS IT IS. IS THAT, UM, BECAUSE
RATES ARE HIGHER. THEN THEY HAVE
BEEN FOR A LOT OF THE VOLUNTARY
MARKET. UM WE HAVE LENDERS, UM
AND OR REALTORS WHO ARE TELLING
PEOPLE GO TO THE FAIR PLAN. IT'S
CHEAPER. AND FOR I GUESS FOR
SOME OF THESE PEOPLE, THE ISSUE
IS JUST GETTING INSURANCE FOR
THE LOAN AND THE FAIR PLAN.
INSURANCE IS SUFFICIENT TO
SECURE THE LOAN AND SO BECAUSE
OF THE RATES THEY'RE WILLING TO
TAKE THE LESS COVERAGE. AND COME
TO COME TO THE FAIR PLAN. THAT'S
WHAT WE'RE HEARING FROM THE
BROKERS. 16 UM, I BELIEVE I
HEARD YOU SAY THAT, UM WITH
REGARDS TO REINSURANCE THAT
YOU'RE CURRENTLY NOT ALLOWED TO
USE THOSE COSTS IN YOUR RATE.
CORRECT SO MY UNDERSTANDING IS
THAT, UM, WITH THE INSURANCE
COMMISSIONERS PLAN HE'S LOOKING
AT THAT, UH, CHANGING THAT. BUT
HE'S NOT. THEY'RE NOT LOOKING AT
CHANGING IT FOR THE FAIR PLAN,
OR ARE THEY BECAUSE THEY ARE
THEY ARE OKAY. ALL RIGHT. I JUST
WANT TO BE SURE THAT WOULD BE
THAT WOULD BE A HUGE OVERSIGHT.
IF THAT THAT WEREN'T HAPPENING.
EXACTLY YEAH, WE'VE HAD THOSE
CONVERSATIONS, RIGHT? WE CAN'T
IF YOU GIVE IT TO THE VOLUNTARY
MARKET AND THEIR RATES GO UP AND
OURS. DON'T RIGHT, THEN YOU GET
INTO THAT SAME ISSUE, BUT, UM,
NO. WE'RE HAVING DISCUSSIONS
ABOUT THAT WITH THEM. AND THEN
JUST, YOU KNOW, AND NOT
ANECDOTAL BECAUSE I TALKED TO
PEOPLE WHO ARE EXPERIENCING THIS
AND I RECOGNIZED THE YOU KNOW
YOU'VE HAD I TEACH CHALLENGES
YOU HAVE BUT I'M HEARING FROM
SOME PEOPLE THAT IS SOMETIMES
TAKING THEY'RE ON HOLD FOR, YOU
KNOW AROUND HOLD FOR A DAY ALL
DAY TO GET THROUGH TO SOMEBODY
THAT IS SOMETIMES TAKING TWO
PLUS MONTHS TO GET A POLICY, UM,
WRITTEN IS THERE SOME RELIEF IN
THE HORIZON FOR PEOPLE WHO ARE
BECAUSE NOW IF YOU WERE TRYING
TO CLOSE THAT REAL ESTATE
TRANSACTION, OR YOU ARE
DESPERATE TO HAVE ANY COVERAGE
AT ALL, BECAUSE YOUR CARRIER HAS
TOLD YOU THERE WERE CANCELED, UM
THE AMOUNT OF ANGST AND ANXIETY
THAT PEOPLE ARE FACING IS PRETTY
ALARMING. AND THERE'S LITERALLY
NOWHERE FOR THEM TO TURN. SO
WHEN WILL WE GET? I DON'T. IT'S
NOT ANECDOTAL. THAT IS NOT
ANECDOTAL. AND SO WHEN WILL WE
SEE SOME RELIEF IN THAT SO THAT
THAT PEOPLE CERTAINLY IN HIGH
RISK HIGH RISK AREAS AND NOT
JUST HIGH RISK AREAS. UM YOU
TALKED ABOUT EVERYBODY, MY IN
LAWS. UH WE'RE ON THE FAIR PLAN
BECAUSE THEIR INSURANCE AND THEY
LIVE IN SUBURBAN LOS ANGELES
AREA, RIGHT? SO IN AN AREA THERE
IS NO THERE IS THERE REALLY? I
MEAN, IT'S A SUBURBAN AREA THAT
DOESN'T HAVE A HUGE HIGH FIRE
RISK WHERE THEY WHERE THEY
HAPPEN TO BE SO WHEN CAN WE TELL
OUR CONSTITUENTS THAT THIS. THIS
IS GOING TO IMPROVE, SO I HAVE
GOOD NEWS ON THAT FRONT. I CAN
TELL YOU WE'VE ALREADY STARTED
TO MAKE THE TURN. I WILL NOT
TELL YOU THAT EVERYTHING IS
PERFECT BECAUSE IT'S NOT. UM BUT
OUR AVERAGE HOLD TIME OVER THE
LAST 15 DAYS IS 11.5 MINUTES. SO
PEOPLE ARE NOT SITTING ON HOLD
THAT LONG. THE PHONE CALLS MIGHT
BE TAKING A LITTLE BIT LONGER.
SO ONCE THEY'RE ON THE PHONE
BECAUSE I'VE GROWN, WE'VE GROWN
FROM 18 CUSTOMER SERVICE REPS TO
75 PEOPLE ANSWERING THE PHONES
WE GET ON AVERAGE ABOUT 2200
PHONE CALLS A DAY. SO WE DO HAVE
A LOT OF NEW PEOPLE ON THE PHONE
. STILL WHO ARE STILL LEARNING?
UM AND YOU KNOW IT TAKES TIME TO
GET RETRAINED UP. UM BUT WE ARE
PROCESSING WORK FASTER. UM THE
MAJORITY OF OUR POLICIES ARE OR
ARE QUOTES ARE ISSUED WITHIN
FIVE DAYS. BUSINESS DAYS, WHICH
IS R S L A, UM I MUST SAY A LOT
OF THEM AND I'M AGAIN. I
WATCHED. WE WATCHED THE NUMBERS
DAILY NOW. WE TURNED AROUND A
LOT OF THEM OVERNIGHT NOW, SO I
THINK THERE'S A COMBINATION OF
THINGS THAT HAPPEN RIGHT.
THERE'S ISSUES WITH THE SYSTEM
BROKERS LEARNING THE NEW SYSTEM.
UM ARE ARE INTERNAL PEOPLE
LEARNING THE NEW SYSTEM AND
JUSTICE. I DON'T KNOW HOW TO SAY
IT. BARRAGE DEMAND SEARCH THAT'S
BETTER THAN FARAGE. BUT DEMAND
SURGE ALL KIND OF CULMINATING AT
THE SAME TIME, BUT THE NUMBERS
ARE EVERY DAY ARE LOOKING BETTER
. UM I WILL TELL YOU THAT, UM,
WE HAVE HAD, UM WE'VE HAD
CUSTOMERS WHO HAVE BROKERS WHO
HAVE COME TO US AND RAISED
ISSUES AROUND ESCROW CLOSES. WE
DO GET THOSE ISSUED WHEN WE FIND
OUT ABOUT THEM. UM, I I'VE GOT A
NUMBER OF THEM THAT HAVE MY
PERSONAL EMAIL ADDRESS TEXT
MESSAGES, WHATEVER THEY NEED IN
ORDER TO GET A HOLD OF ME. UM
AND, UM, I KNOW THAT SOME OF THE
CONSTITUENTS HAVE RAISED UM,
ISSUES TO YOUR LEVEL. UM THEY'VE
BEEN GOING THROUGH ARMAND
GETTING THE POLICIES ISSUED THAT
WAY THAT'S REALLY DYING DOWN
BECAUSE WE'RE NOW WE'RE REALLY
GETTING ON TOP OF THE WORK, BUT
WE STILL HAVE WE STILL HAVE WORK
TO DO. BUT EVERY DAY IT LOOKS
BETTER. AND THEN JUST A FINAL
QUESTION. UM, SO I REPRESENT AN
AREA THAT HAS A LOT OF
AGRICULTURE, PARTICULARLY
WINERIES. UM AND, UM THEY
OBVIOUSLY ARE STRUGGLING. UH AND
SO WHEN YOU TALK ABOUT YOUR
COMMERCIAL PLANS IS THAT INCLUDE
AGRICULTURAL TYPE BUSINESSES AS
SUCH AS WINERIES, AND, UH THEN
VINEYARD PROPERTY THAT SORT OF
THING WHEN WE PRESENTED OUR
PROPOSAL TO THE DEPARTMENT FOR
THE $20 MILLION PER STRUCTURE
AND THE HIGHER LIMIT IN
COMMERCIAL, WE DID NOT, UM
LIMITED TO JUST CONDO
ASSOCIATION. I'M NOT SURE WHERE
WE'LL END UP AT THE END OF ALL
THIS, BUT WE DID NOT LIMIT IT
THAT WHEN WE SENT THE PROPOSAL
IN AGRICULTURAL PROPERTIES, THE
SAME COVERAGES THAT WE OFFER
TODAY FOR THE BUILDINGS. YES,
THEY WOULD BE INCLUDED WOULD BE
THEY WOULD BE COVERED. OKAY.
THANK YOU, MADAM CHAIR. YOU'RE
WELCOME, ASSEMBLYWOMAN OR TAKE
IT. DID YOU HAVE A QUESTION?
PEOPLE WORK UP HERE. THANK YOU
FOR YOUR VERY DETAILED
PRESENTATION. I WAS HERE AT THE
LAST HEARING. UM THAT WE HAD A
YEAR AGO AND LOOKING AT THE
ANALYSIS THAT WAS PRESENTED TO
US TODAY. THERE'S A QUESTION
HERE ABOUT WHETHER OR NOT
THEY'RE FAIR PLAN IS STILL THE
INSURER OF LESS RESORT AND YOUR
OPENING STATEMENT WITH THE
NUMBER OF INCREASED POLICIES
THAT, YOU KNOW HAVE THE ANSWER
IS CLEARLY NO. AND YOU KNOW, YOU
KNOW, IN TERMS OF CONSTITUENTS
CALLING MY OWN. YOU KNOW, MY
MAYOR AND MY CITY AND I DO NOT
LIVE IN ONE OF THE WILDFIRE
AREAS BUT CALLED ME AND SAID, I
CAN'T GET INSURANCE. IT'S
KLODIAN ISSUE THE LONG WAIT
TIMES. AH SO MY QUESTION IS MORE
ABOUT YOU KNOW HOW WHAT ARE WE
HEARING FROM THE INSURANCE
COMPANIES? AND THEIR COMMITMENTS
TO GET PEOPLE OFF THEIR FAIR
PLAN ONTO ONTO THE PRIVATE
MARKET. UM IT'S STILL A QUESTION
THAT I HAVEN'T HEARD ANSWERED.
YEAH, AND I, UM HATE TO NOT
ANSWER A QUESTION, BUT I'D HAVE
TO DIRECT YOU TO THE TRADES AND
THE PRIVATE INSURANCE COMPANIES
BECAUSE I CAN'T ANSWER FOR THEM.
IN TERMS OF WHAT THEIR PLANS
ARE. SO WE'RE REALLY FOCUSED ON
MAKING SURE THAT WE'RE PROVIDING
THE COVERAGE WE NEED TO PROVIDE
TODAY AND THAT WE'RE READY TO UH
, HELP THE INSURANCE COMPANIES
TAKE THE POLICIES BACK INTO THE
MARKET WHEN THEY'RE READY. AND I
GUESS ANOTHER QUESTION THAT I'VE
BEEN GETTING A LOT FROM
CONSUMERS IS ABOUT THEIR
REDUCTIONS. UM YOU KNOW IF
THEY'RE DOING WILDFIRE UPDATES
TO THEIR PROPERTIES, UM, YOU
KNOW IF THEY'RE DOING EVERYTHING
THAT THEY'RE SUPPOSED TO BE
DOING, WILL THEY BE ALLOWED TO
GET OFF THE FAIR PLAN AND RETURN
TO THE REGULAR MARKET WHEN THERE
IS SOMEONE TO TAKE THEM? SO UM,
I THINK THAT QUESTION AGAIN GOES
BACK TO THE VOLUNTARY MARKET.
WHAT I WILL TELL YOU IS WE ARE
TRACKING THAT WE ARE ONE OF WE
WERE ONE OF THE FIRST COMPANIES
TO PROVIDE A DISCOUNT TO
CONSUMERS WHO ARE MAKING THOSE
CHANGES. SO UM, IF THEY'RE DOING
WHAT THEY NEED TO DO FOR
DEFENSIBLE SPACE OR THE
STRUCTURE, WE'RE PROVIDING A
DISCOUNT TO THEM ON THEIR
WILDFIRE PREMIUM. FOR THE TIME
THERE WITH THE CALIFORNIA FAIR
PLAN. WE ARE ADDING THAT UM TO
OUR CLEARINGHOUSE DATABASE SO
THAT WHEN THE COMPANIES ARE
READY TO TAKE BUSINESS FROM US,
THEY'LL KNOW WHICH OF THOSE
CUSTOMERS HAVE ALREADY DONE WHAT
THEY NEED TO DO TO PROTECT THEIR
HOME BECAUSE WE DO THINK IT WILL
BE A FACTOR. BUT AGAIN, THE
SPECIFICS OF THAT WOULD HAVE TO
GO BACK TO THE PRIVATE MARKET.
THANK YOU. MR GIBSON. THANK YOU
VERY MUCH, MADAM CHAIR AND THANK
YOU FOR YOUR PRESENTATION. I
HAVE JUST A FEW QUESTIONS.
DOCTOR WOULD ASK THE QUESTION. I
WAS GOING TO ASK AROUND THE WAIT
TIME BECAUSE I ALSO HEARD THAT
IT WAS A LONG WAIT. SO CAN YOU
WALK ME THROUGH WHEN A PERSON
CALLS FOR INSURANCE? UH, JUST
FOR MY OWN EDIFICATION. THEY
RECEIVED. SOMEONE ON YOUR END,
RECEIVED THE CALL. AND THEN
THERE IS WHAT TAKES PLACE. SO
IT'S LOADED QUESTIONS, SO IT
DEPENDS ON IT DEPENDS ON WHAT
THEY'RE CALLING ABOUT, RIGHT. SO
UM, I THINK THE FIRST THING IS
THE THAT A BROKER CAN SUBMIT ON
BEHALF OF A CUSTOMER. THEY CAN
SUBMIT AN APPLICATION ONLINE AND
THAT APPLICATION THAT HAS
REVIEWED IF EVERYTHING IS THERE,
AND THERE'S NO QUESTIONS ABOUT
THE APPLICATION. UM THEY WILL
GET A QUOTE. RIGHT WE WILL ISSUE
A QUOTE. ONCE THAT QUOTE IS
ISSUED, THE CUSTOMER CAN PAY AND
THEY CAN IN THE POLICY GETS
ISSUED, SO WE BIND THE BUSINESS,
BUT WE DO IT A LITTLE BIT
DIFFERENTLY THAN OTHER INSURANCE
COMPANIES BECAUSE WE REQUIRE THE
APPLICATION BEFORE THE QUOTE,
THEY GET THE QUOTE. ONCE THEY
HAVE THE QUOTE, THEY'RE ALLOWED
TO BIND THE BUSINESS THEY CAN
PAY AND THEN WILL BIND THE
BUSINESS THE NEXT DAY, AND THAT
RATE ONE FLUCTUATE. THAT RIGHT
WON'T CHANGE THAT HAS NOT
CHANGED ONCE THAT QUOTE IS
LOCKED IN SO YEAH, AND THEN IF
THEY HAVE TO CALL BECAUSE THEY
HAVE A QUESTION, WHICH CAN WE
GET ABOUT 2300 CALLS A DAY, SO A
LOT OF THEM HAVE QUESTIONS THEY
GET TO A CUSTOMER SERVICE REP.
AND IT REALLY DEPENDS ON THE
QUESTION. SO ONE OF THE THINGS
WE'RE DOING RIGHT NOW, AS UM
ASSEMBLYMEMBER'S WOULD ASKED
ABOUT KIND OF WHERE WE GOING
WITH THIS. ONE OF THE THINGS
WE'RE DOING NOW IS UP SKILLING
SO MOST PEOPLE ARE ANSWERING THE
PHONE SO THEY CAN BE ONE AND
DONE ON THE PHONE SO THEY DON'T
HAVE TO SEND THAT SOMEWHERE ELSE
TO BE HANDLED ONCE SOMEBODY
CALLS IN. SO AM I TO CONCLUDE
THAT EVERYONE WHO CALLS IS IN
FACT, UM, RECEIVED AN INSURANCE
POLICY. IS THERE, A TIME IN
WHICH SOMEONE IS REJECTED? AND
IF SO, WHY? USUALLY IF SOMEBODY
IS REJECTED. UH IT'S BECAUSE WE
HAVEN'T GOTTEN ALL THE
INFORMATION WE NEED TO HAVE. SO
UM, WHETHER IT'S BECAUSE BROKER
DIDN'T SEND IN THE PHOTOS THAT
WE NEEDED, OR USUALLY, IT'S THE
THINGS LIKE A HIGH VALUED HOME
WHERE WE DIDN'T GET A
REPLACEMENT COST ESTIMATE TO
COMPARE THE COVERAGE AGAINST BUT
FOR NORMAL PURPOSES. AND WE HAVE
VERY FEW UNDERWRITING GUIDELINES
THAT WILL PREVENT SOMEBODY FROM
ACTUALLY GETTING A QUOTE AND
BEING ABLE TO ISSUE A POLICY
WITH US. SO WITH OUR LAST GREAT
FILING, WE WORKED WITH THE
DEPARTMENT TO REALLY PARE DOWN
THE REASONS WHY SOMEBODY
COULDN'T GET INSURANCE WITH THE
FAIR PLAN. KNOWING THAT WE'RE
THE INSURER OF LAST RESORT. WE
SHOULD BE AVAILABLE TO PEOPLE
WHO NEED INSURANCE. UM AND SO
WHAT WE DID IS WE CHANGED OUR
RATING. UH STRUCTURE TO SAY IF
THE HOME IS INSURABLE, BUT THE
HOME IS NOT IN GOOD CONDITION,
AND IT'S SOMETHING THAT THE
HOMEOWNER HAS CONTROL OVER. SO
IT'S NOT WHERE IT'S LOCATED. WE
MIGHT SURCHARGE THE CUSTOMER IN
CHARGE THEM A HIGHER RATE UNTIL
THEY GET THAT CONDITION. FIXED
AND THEN ONCE THEY GET THAT
CONDITION FIXED, THEIR INSURANCE
PREMIUM WILL GO BACK DOWN. SO
YOU'RE TALKING ABOUT REALLY THE
EXTREME CIRCUMSTANCES SOMEBODY
IS REJECTED BY THE FAIR PLAN.
OKAY I'M GOING TO THE RATES. YOU
MADE MENTION THAT THE
LEGISLATURE SET THE RIGHTS
CORRECTLY. DEPARTMENT OF
INSURANCE APPROVES DEPARTMENT
AND HOW OFTEN ARE THOSE RATES
SET CHANGED DECREASE INCREASED.
BYE. ACCORDING TO OUR PLAN OF
OPERATIONS, WE HAVE TO SUBMIT A
RATE FILING AT LEAST EVERY TWO
YEARS. SO THE LAST ONE WE
SUBMITTED WAS IN AUGUST OF 2021.
AND THE RATE FILING WAS APPROVED
IN SEPTEMBER OF 2023. THAT RATE
FILING WAS TO INCREASE THAT WAS
TO INCREASE 15.7. IS THAT THE
HIGHEST OF YOU WELCOME INCREASED
SO UM, THE YES. SO, UM WE HAD AN
INCREASE IN 2020 OF ABOUT THE
SAME 15.6. AND DON'T QUOTE ME ON
THE NUMBERS BECAUSE I'M DOING
OFF TOP OF MY HEAD. BUT THAT WAS
I BELIEVE. WE ASKED THE ASKED TO
THE DEPARTMENT WAS ABOUT 35% AND
THEY GAVE US ABOUT 15.5. UM THIS
TIME IN 2021 WHEN WE FILED RIGHT
AFTER THAT. THE NEXT YEAR WE
FILED WE FILED FOR A 48%
INCREASE. OUR RATE NEED AT THE
TIME WAS AROUND 70% WE ASKED FOR
48.8% AND WE GOT APPROVED OF
15.7. A LOT OF THAT IS BECAUSE
EXACTLY WHAT WE'RE TALKING
ABOUT. THE NET COST OF
REINSURANCE IS NOT ALLOWED.
CATASTROPHE IS NOT ALLOWED, AND
WE'RE ALL ALLOWED FOR THE COST
OF CAPITAL IN OUR RATES. AND SO
THOSE GET PULLED OUT AND THEN
SOME BACK AND FORTH NEGOTIATIONS
WITH THE DEPARTMENT. UM SO
THAT'S WHERE WE ARE. WE HAVE NOT
FILED AGAIN BECAUSE WE'RE
WAITING TO GET APPROVAL TO FILE
WITH CATASTROPHE MODELING AND,
UM, NET COST OF REINSURANCE IN
THE RIGHT FILING, AND THEN WE'LL
FILE AGAIN. FOR INCREASE FOR AN
INCREASE AND THEN JUST TO GIVE
YOU CONTEXT, RIGHT? WE FILE AND
IT TAKES US ABOUT 90 DAYS TO DO
A FILING. SO IF THEY GAVE US THE
OKAY NOW, IT WOULD BE THREE
MONTHS FROM NOW. WHEN WE
ACTUALLY FILED THEN, HOWEVER
LONG IT TAKES THE DEPARTMENT TO
GO THROUGH AND APPROVED THAT
FILING AND THEN TAKES US ANOTHER
9100 AND 20 DAYS TO IMPLEMENT
ANY KIND OF FILING. SO ANY
CHANGE WE MAKE TAKES ABOUT 14
MONTHS FROM THE TIME WE START
WORKING ON IT TO THE TIME IT
ACTUALLY HITS IN OUR SYSTEM JUST
AND THAT'S DEPENDING ON HOW LONG
THAT BACK AND FORTH WITH THE
DEPARTMENT GOES FOR APPROVAL.
JUST GOING BACK TO THE CALL THE
CALL CENTER. YOU HAD 18 YOU
INCREASE IT TO 75 PEOPLE AND THE
WAIT. TIME IS WITH THE 75 PEOPLE
IS AT 11 MINUTES. IT IS AND HAS.
IF IT GOES OVER, THERE'S A CALL
OR HAVE OPPORTUNITY TO SAY THAT,
YOU KNOW, PUT YOUR NUMBER IN
BECAUSE SOME COMPANIES, PUT YOUR
NUMBER IN AND CALL YOU BACK AND
PLACED IN A QUEUE WHEN SOMEONE
IS READY, THE PHONE RINGS AND
THERE'S A PERSON ON THE PHONE.
I'LL BE HONEST WITH YOU. THAT'S
EXCELLENT QUESTION. WE ARE IN
THE PROCESS OF LOOKING AT NEW
PHONE SYSTEMS BECAUSE OUR
CURRENT PHONE SYSTEM IS PRETTY
ANTIQUATED, WHICH IS ALSO PART
OF THE PROBLEM WITH THESE LONGER
WAIT TIMES, BECAUSE JUST LIKE IF
WE HAD BEEN ON OUR OLD SYSTEM,
WE WERE ON OUR OLD PHONE SYSTEM.
ALL OF A SUDDEN WE GOT THIS
DEMAND SURGE OF PHONE CALLS, AND
OUR SYSTEM COULDN'T HANDLE IT.
SO SOME OF WHAT YOU ARE ASKING
ABOUT IN TERMS OF PEOPLE AROUND
THE HOLD ALL DAY. IT'S BECAUSE
THE CALLS NEVER EVEN CAME
THROUGH BECAUSE AND WE DIDN'T
KNOW THAT AT THE TIME, BUT THE
CALL SYSTEM WAS PAYING UP ON
PEOPLE. IT WAS PUTTING PEOPLE
INTO AN EVER AND NEVER ENDING
LOOP KNOT THAT WE HAD THE STAFF
THAT WE COULD HAVE ANSWERED THEM
ALL, BUT THEY COULDN'T GET
THROUGH IF THEY TRIED. SO NOW
WE'RE AT A BETTER POINT. BUT
WE'RE LOOKING AT DOING A SWITCH
OVER TO A NEW PHONE SYSTEM THAT
WILL ALLOW US THAT CALL BACK
OPTION AND OR CHAT OPTION SO
PEOPLE COULD CHAT IN AND GET
ANSWERS TO THEIR QUESTIONS
VERSUS HAVING TO WAIT FOR
SOMEBODY ANSWER THE PHONE AND
GIVE THEM THEIR ANSWERS. FINAL
QUESTION IS, IS YOUR CALL CENTER
LOCATED IN CALIFORNIA? IT IS OUR
CALL. CENTER EMPLOYEES ARE
REMOTE, SO MOST OF THEM LIVE IN
CALIFORNIA, BUT IT'S REMOTE.
THEY'RE ALL REMOTE. THEY WORK
OUT OF THEIR HOMES. THANK YOU.
PALABRAS THANK YOU VERY MUCH.
THANK YOU FOR THE PRESENTATION.
FIRST OUT, WE'LL ACKNOWLEDGE. UM
WHAT? I'VE TOLD A FEW FOLKS HAVE
TALKED ABOUT INSURANCE. I'M AN
INSURANCE 101. STILL SO A LOT OF
BASICS AND SOME OF THE QUESTIONS
I'LL ASK YOU. MIGHT BE VERY
BASIC FOR MY COLLEAGUE, SO I
APOLOGIZE IF THAT'S THE CASE.
LET ME START WITH, UM, ASKING
YOU ABOUT, UM THE ARE YOU ABLE
TO SHARE THE ASSETS THAT YOU
HAVE THE PLAN CURRENTLY HOLDS SO
, UM RIGHT NOW, OUR SURPLUS IS
ABOUT $200 MILLION. THAT'S AFTER
THE REVENUE FROM ANNUAL
POLICIES. AND BECAUSE YOU'RE AT
A NONPROFIT TO YOU, OR HOW DOES
HAS A SURPLUS GROWN OR IS IT
MAINTAINED? IT HAS GROWN. SO
WHEN I STARTED WITH THE FAIR
PLAN, EVEN WHEN I STARTED AS THE
PRESIDENT TWO YEARS AGO, BECAUSE
I LIKE TO TAKE CREDIT FOR IT. WE
WERE ACTUALLY AT A DEFICIT SO WE
DIDN'T HAVE ANY SURPLUS. WE WERE
AT A DEFICIT. UM WHILE I TAKE
CREDIT FOR IT A COUPLE OF YEARS
KNOCK ON WOOD OF VERY SMALL
CATASTROPHES, AND NO LARGE
CATASTROPHES HAS ALLOWED US TO
GROW THAT SURPLUS. I WAS GOING
TO ASK THAT BECAUSE YOU'RE A NON
FOR PROFIT, AND SO YOU'RE NOT
REALLY INTENDED TO HAVE A
SURPLUS, WHICH IN THE PRIVATE
SECTOR IS A PROFIT BECAUSE YOU
HAVEN'T HAD TO ANY CLAIMS THAT
HAVE BEEN SUBSTANTIAL, RIGHT?
OKAY? UM LET ME ASK YOU ABOUT
THE PROCESS THAT YOU HAVE TO GO
THROUGH BECAUSE YOU DESCRIBED
THE 14 MONTH. HMM PROCESS WHICH
IS VERY SIMILAR TO WHAT THE
PRIVATE MARKET EXPRESSES, UM
EXPLAIN TO ME WHERE I MIGHT BE
MISUNDERSTANDING THAT YOU ARE
NOT UNDER THE PROVISIONS OF
PROPOSITION 103. YET YOU SEEM TO
GO THROUGH THE EXACT SAME
PROCESS THAT THOSE THAT ARE
UNDER PROPOSITION ONE OF THREE
ARE GOING THROUGH. UM SO WE ARE
NOT UNDER PROP 103. UM WE'RE IN
ASSOCIATION. WE HAVE A SEPARATE
STATUTE THAT CREATED THE FAIR
PLAN. BUT WE STILL REPORT OR ARE
REGULATED BY THE DEPARTMENT OF
INSURANCE SO BECAUSE WE'RE STILL
REGULATED BY THE DEPARTMENT OF
INSURANCE, THEY REQUIRE US TO
FILE OR IT HASN'T MY
UNDERSTANDING AND THIS IS BEFORE
MY TIME. IT HASN'T ALWAYS BEEN
LIKE THIS, BUT THEY REQUIRE US
TO FILE OUR RATES WITH THEM. AND
WE GO THROUGH A SIMILAR PROCESS
THAT THE VOLUNTARY MARKET GOES
THROUGH. BUT BECAUSE WE'RE NOT
PROP 103, THERE'S NO INTERVENER
PROCESS OR ANY OF THAT. IT'S
JUST NEGOTIATION BACK AND FORTH
WITH THE DEPARTMENT. SO WHAT DO
YOU EXPECT? WOULD YOU SAY THAT?
THAT'S MORE OF A PRACTICE AND IT
REALLY IS A REGULATORY
REQUIREMENT OF YOURS OR A
STATUTORY REQUIREMENT? SO I'M
GOING TO SAY THAT GOES BEYOND MY
KNOWLEDGE, AND WE'D HAVE TO GET
HAVE TO GET BACK TO YOU BECAUSE
I'D HAVE TO CHECK WITH MY LEGAL
DEPARTMENT. OKAY? UM SO
HISTORICALLY, YOU'VE BEEN MUCH
SIGNIFICANTLY HIGHER COST THAN
THE, UM WHAT DO WE CALL
VOLUNTARY MARKET IS WHAT IS
REFERRED TO AS PRIVATE SECTOR.
UM AND BUT I HEARD YOU
DESCRIBING THE QUESTIONS AND IN
YOUR PRESENTATION THAT YOU NOW
SOMETIMES COMPETE WITH THE
PRIVATE, UM, WITH VOLUNTARY
MARKET. UM YEAH, IT SEEMS LIKE
YOU'VE REQUESTED UH UM.
INCREASES THAT PERHAPS COULD
HAVE KEPT YOU AT THAT
TRADITIONAL RATE OF THREE TIMES
HIGHER, BUT YOU OBVIOUSLY
HAVEN'T RECEIVED THOSE REQUESTED
ADJUSTMENTS. SO, UM WHAT IS THE
YOU TALKED ABOUT REINSURANCE AS
BEING ONE OF THE MAIN REASONS.
WHAT ARE THE OTHER? REASONS TO
WHY YOU HAVEN'T BEEN ABLE TO
RECEIVE THE ADJUSTMENTS THAT YOU
BELIEVE WERE ADEQUATE WHEN YOU
SUBMITTED YOUR INITIAL RATE
REQUEST. UM SO I WOULD SAY THERE
NET. CUSTOMARY INSURANCE IS THE
PRIMARY. THE NEXT ONE IS THE
COST OF CAPITAL BECAUSE WE'RE
NOT FOR PROFIT. WE DON'T INCLUDE
ANY COST OF CAPITAL BECAUSE
THERE'S NEVER BEEN KIND OF THE,
UM WE HAVEN'T BEEN IN A POSITION
WHERE WE'VE BEEN TRYING TO GROW
OUR CAPITAL LAYER. WHICH WE'RE
TALKING ABOUT NOW BECAUSE THAT
CAPITAL LAYERS WITH KEEPS YOU
FINANCIALLY STABLE AS BEING ABLE
TO PAY YOUR LOSSES WHEN THEY
COME. AND SO, UM, SO THE COST OF
CAPITAL HAS NOT BEEN PART OF OUR
APPROVED RATES AND THEN
CATASTROPHE MODELING. SO WHEN
YOU'RE CATASTROPHE INSURER IN
PARTICULAR AND YOU'RE LOOKING AT
YOUR LOSSES WHEN YOU HAVE A
NUMBER OF YEARS WHERE THERE'S
BIG LOSSES. BUT IF ALL YOU'RE
DOING IS TAKING, SAY THE PAST 20
YEARS AND YOU'RE AVERAGING OVER
THAT, RIGHT WHEN WE WERE A SMALL
COMPANY WITHOUT A LOT OF
EXPOSURE, AND WE DIDN'T HAVE
THESE HUGE CATASTROPHES, AND YOU
LOOK AT 20 YEARS OF LOSSES AND
YOU SAY THAT'S HOW MUCH WE'RE
GOING TO EAT. THAT'S WHAT WE'RE
GONNA USE TO PROJECT CURRENT
FUTURE LOSSES. WHERE THAT REALLY
LOOKING AT CATASTROPHE MODELING
AND WHAT'S PROJECTED. WHAT'S
REALLY PROJECTED WITH YOUR
CURRENT BOOK? THAT ALSO PLAYS
INTO YOUR RATES. SO THOSE THREE
PIECES ARE THE PIECES PRIMARILY
THAT KEEP OUR RATES BUT HELP ME
UNDERSTAND ABOUT THE CATASTROPHE
MODELING, WHICH I KNOW IS A
SIGNIFICANTLY HIGHER NUMBER. BUT
YOU, YOU YOU IN YOUR CURRENT, UH
, THE POLICIES THAT YOU ISSUED
YOU. YOU HAVE A KNOWN LIABILITY
OF OVER 300 BILLION THAT'S NOT
WITH CATASTROPHE MODELING
EXACTLY OR JUST ARE TRUE. THAT'S
HOW MUCH INSURANCE WE HAVE ON
THE BOOKS RIGHT NOW. AND SO, UM
I GUESS I'M TRYING TO UNDERSTAND
WHO DREW THE LINE. WHERE AT WHAT
POINT TO SAY THAT IT'S OKAY TO
HAVE A $320 BILLION LIABILITY.
WITH A 200 MILLION AT THIS POINT
, YOU KNOW, WHICH IS YOUR
HIGHEST $0.200 MILLION IN
ASSETS. AND THAT THAT WOULD BE A
NORMAL OKAY. BUSINESS MODEL. AND
NOT ACTUALLY ALLOW YOU TO HAVE,
UM I HAVE, UH, HIGHER ANNUAL
POLICY REVENUE THAT WOULD HELP
YOU GET A LITTLE BIT CLOSER,
SOMEWHAT THEIR DECISION AT SOME
POINT IN TERMS OF WHAT THAT
AMOUNT WAS. UM SO I COULD GET
YOU MORE INFORMATION ON THE
HISTORY BEHIND HOW THIS WORKS.
UM, BUT WHAT I WOULD TELL YOU
IS, I DON'T THINK I DON'T. I
DON'T THINK ANYBODY THINKS IT'S
A GOOD MODEL RIGHT NOW. RIGHT
GIVEN WHERE WE ARE WITH THE
MARKET. I THINK IT WAS DIFFERENT
WHEN WE HAD $50 BILLION OF
EXPOSURE IN 2018 PEOPLE WERE A
LITTLE MORE, YOU KNOW. IT WAS A
LITTLE BIT EASIER TO DIGEST IT,
RIGHT. UM IT'S THE WAY WE'RE
STRUCTURED. IT'S UM HOW OUR PLAN
OF OPERATIONS HAS SET UP ITS
POLICY FROM THE DEPARTMENT. ITS
LEGISLATION LEGISLATION. IT'S
ALL OF IT TOGETHER THAT CREATES
WHERE WE ARE RIGHT. SO THE
LEGISLATION ITSELF SAYS THAT THE
VOLUNTARY MARKET PARTICIPATES IN
OUR PROFITS AND LOSSES. WHICH IF
YOU THINK ABOUT IT MEANS THAT IF
WE HAVE A SURPLUS, TECHNICALLY,
THAT'S PROFIT. SO DO WE HOLD ON
TO THAT, OR DO WE GIVE THAT BACK
TO THE VOLUNTARY MARKETS? SO
RIGHT NOW, WE'RE HOLDING ON TO
IT BECAUSE I THINK EVERYBODY
AGREES. FINANCIAL STABILITY OF
THE FAIR PLAN IS THE KEY, RIGHT
WE GOT FOR US. WE HAVE TO BE
FINANCIALLY STABLE IN ORDER TO
UM, HELP ASSURE THE STABILITY OF
THE MARKET, SO I DON'T KNOW THAT
THERE'S ONE ANSWER TO IT. I
THINK IT'S ALL THE PIECES
TOGETHER. OKAY LET ME ASK YOU
ABOUT TWO THINGS. THREE THINGS
THAT ARE IN YOUR PRESENTATION
THAT I'M TRYING TO UNDERSTAND
THIS CLEARINGHOUSE. UM UH, IDEA
TO HELP TRANSITION FAIR PLAN
POLICIES TO THE VOLUNTARY
MARKET. WHAT EXACTLY? IS IT? AND
WHERE DOES IT STAND TODAY? I
KNOW THAT AT LEAST THIS WAS
RECENT WITH LAST YEAR'S BILL,
BUT DOCTOR WOULD SEEMS LIKE HE
HAS SOME LEGISLATION NOW FOUR
YEARS AGO. SO WHERE DOES THIS
STAND? THE CLEARINGHOUSE
CONCEPTUALLY. UM, THE CONCEPTUAL
PART OF THE CLEARINGHOUSE IS
BASICALLY WE PROVIDE A PLATFORM.
FOR THE VOLUNTARY MARKET AND THE
N S MARKET TO BE ABLE TO COME IN
AND SAY. I'M WILLING TO WRITE
THESE POLICIES. THEY DON'T NEED
TO STAY WITH THE FAIR PLAN. THEY
ARE IN AREAS WHERE WE'RE WRITING
BUSINESS. WE CAN PICK UP MORE
EXPOSURE. I'M GOING TO IF YOU
WILL CHERRY PICK RIGHT, I'M
GONNA GO THROUGH AND SAY HERE'S
10,000 POLICIES THAT, UM, I CAN
OFFER INSURANCE FOR RIGHT.
THAT'S THE IDEA OF THE
CLEARINGHOUSE ARE ROLLING. IT IS
TO PROVIDE THAT DATA COMPANIES
CAN COME IN AND DO IT AND TAKE
THE AND TAKE THE POLICIES. UM
IT'S A IT'S A REASONABLE MODEL,
RIGHT? THAT SOUNDS REASONABLE.
PUT IT OUT THERE. UM AS WE WERE
TALKING ABOUT BEFORE, I THINK
ONE OF THE CONCERNS THAT WE
HAVEN'T FIGURE IT OUT OR THE
INDUSTRY HASN'T FIGURED OUT YET
IS. HOW DO I ACTUALLY TAKE THOSE
POLICIES FROM A BROKER IF THAT
BROKERS NOT APPOINTED WITH THE
COMPANY WHO'S WILLING TO WRITE
THEM? UM AND UNDERSTANDABLY, THE
BROKERS ARE CONCERNED BECAUSE
THAT'S THEIR CUSTOMER, AND
THAT'S THEIR BUSINESS, AND
THAT'S THEIR ACCOUNT. BUT IF
THEY IF THAT BROKER DOESN'T HAVE
ANOTHER MARKET TO MOVE IT TO AND
THEY'RE NOT APPOINTED WITH THE
COMPANY WHO'S WILLING TO WRITE
IT RIGHT AND IT'S GOT TO BE MORE
THAN THE ONE OR TWO RIGHT. WE'RE
TALKING ABOUT COMING IN AND
TAKING BLOCKS OF POLICIES THAT
WOULD BE IDEAL. I THINK THAT'S
THE INTENT. I THINK WE JUST NEED
TO LOOK AT LOGISTICALLY HOW THAT
WOULD WORK VERY FACT. JUST ADD
ONTO THAT JUST KIND OF PUT
VISUALLY YOU HAD THAT LOOKS. SO
HERE'S THE FAIR PLAN AND THE
VOLUNTARY MARKET. THE AGENT. ON
THE OTHER SIDE. THERE HAS TO BE
A NEGOTIATION BETWEEN THE TWO OF
US RIGHT THERE THE PLATFORM BY
BY LAW, THE WAY THAT'S WRITTEN,
AND THAT'S THERE WAS AGREEMENT
ON THIS WHEN IT PASSED, THAT
NEGOTIATION HAS TO TAKE PLACE.
THEY CAN'T FORCE SOMEBODY GET
OFF THE PARENT PLANT. THOSE TWO
PARTIES HAVE TO NEGOTIATE. OKAY
I SEE. UM WHERE ARE YOU SHOULD
BE A QUICK QUESTION. WHERE ARE
YOU ON THE IN THE PROCESS. A
MONTHS LONG PROCESS OF THE 20
MILLION PER BUILDING, AS OPPOSED
TO PER LOCATION FOR SURE. SO
WE'VE BEEN IN DISCUSSION NOW FOR
A WHILE WITH THE DEPARTMENT
ABOUT WHAT DOES THAT LOOK LIKE?
SO AS I SPOKE ABOUT BEFORE,
RIGHT? OUR CONCERN IS, AS WE
CONTINUE TO LOOK AT EXPANSION OF
COVERAGE IS HIGHER LIMITS. IT
CREATES MORE FINANCIAL
INSTABILITY FOR THE FAIR PLAN,
AND WE HAVE TO BE CAREFUL TO
PROTECT THE POLICYHOLDERS TODAY
AND MAKE SURE THAT WE'RE NOT, UM
, GETTING CLOSER TO A RISK OF
ASSESSMENT. SO DOES THAT MEAN
THAT YOU'RE HOPING THAT IN THOSE
CONVERSATIONS YOU ACHIEVE A RATE
THAT IS MORE ALIGNED WITH OKAY
IT IS. WE'RE SO YOU KNOW, $20
MILLION BUILDING AS PART OF AN
ASSOCIATION. I'M JUST GONNA BE
HONEST, IT'S THAT'S NOT A
RESIDUAL MARKET RISK. THAT'S A
SPECIALTY RISK, RIGHT? BUT WE
UNDERSTAND THAT THERE IS A NEED
RIGHT NOW THAT CAN'T BE FILLED.
AND WE'VE GOT TO FIGURE OUT HOW
TO FILL THAT NEED, SO WE PUT
TOGETHER A PROPOSAL FOR THE
DEPARTMENT. THAT HAS A LOT OF
COMPONENTS TO IT, AND THEN IN
THE DEPARTMENT'S DEFENSE, THEY
JUST GOT THE PROPOSAL THIS
WEEKEND. I'M NOT EVEN SURE
THEY'VE HAD TIME TO OPEN IT YET,
BUT THEY DO HAVE THE PROPOSAL.
UM IT INCLUDES THINGS LIKE AN
UPPER LIMIT, RIGHT? YOU DON'T WE
CAN'T ISSUE A POLICY FOR A
BUILDING. WE ISSUE A POLICY FOR
A RISK. SO ONE CONDO ASSOCIATION
IS ONE RISK AND THERE HAS TO BE
AN UPPER LIMIT TO THE POLICY SO
THAT YOU'RE NOT HAVE UNLIMITED
EXPOSURE FOR THAT RISK. UM THE
RATES AS YOU'VE STATED, THAT'S
PART OF IT, RIGHT. WE NEED THE
COST OF THE COST OF CAPITAL AND
THAT COST OF REINSURANCE AND
CATASTROPHE MODELING IN THOSE
RATES. UM THE OTHER PIECE WE
NEED IS WE NEED TO MAKE SOME
CHANGES TO OUR POLICY LANGUAGE
TO MAKE IT MORE ATTRACTIVE TO
EXCESS CARRIERS TO WRITE THAT
NEXT LAYER OF COVERAGE. SO IF
WE'RE NOT OFFERING ENOUGH THAT
THERE IS AN EXCESS LAYER OF
COVERAGE AVAILABLE TO THE CONDO
ASSOCIATIONS TO PICK IT UP WORK.
WE'RE LOOKING TO CHANGE OUR
LANGUAGE, SO THAT WERE THE
PRIMARY. AND THEN THE EXCESS
CARRIER WILL CARRY EXCESS. ON
TOP OF THAT. UM AND THEN WE NEED
TO LOOK AT OUR UNDERWRITING
GUIDELINES BECAUSE WE NEED TO
MATCH IT SO THE EXCESS CARRIERS
ARE GOING TO BE WILLING TO
WRITE. UM POLICIES ON TOP OF IT.
WE'VE HAD A LOT OF DISCUSSIONS
WHETHER CARRIERS WE'VE TALKED TO
BROKERS. WE'VE TALKED TO EXCESS
CARRIERS. WE'VE TALKED TO
SURPLUS LINES. SO WE'VE BEEN
WE'VE HAD DISCUSSIONS OVER THE
LAST COUPLE OF MONTHS WITH A LOT
OF GROUPS TO KIND OF COME UP
WITH THIS PROPOSAL OF HERE'S HOW
WE BELIEVE WE CAN. MEET THE
NEEDS OF THE MARKET WILL NOT
FURTHER CREATING INSTABILITY IN
THE FINANCIAL UH, FOR
FINANCIALLY FOR THE FAIR PLAN,
AND SO THAT'S WHAT WE'VE GIVEN
TO THE DEPARTMENT. THANK YOU. MY
FINAL QUESTION IS, UM, WITHOUT
GIVING DETAILS. I AM ASSUMING A
LOT OF RESPONSE TO THIS QUESTION
. COULD BE WHAT YOU JUST SHARED,
SO I DON'T I DON'T NEED THE
SPECIFICS, BUT I THINK IT HAS TO
BE ASKED, GIVEN THAT LAST FALL,
UH, THE DECLARATION OF THE
EMERGENCY THE EXECUTOR, THE
EXECUTIVE ORDER EXCUSE ME AND
THE SUSTAINABLE INSURANCE
PROGRAM. UM, THE IN YOUR ROLE
AND YOUR PARTICIPATION IN THAT,
UH, WITHOUT THE NEED TO GIVE
SPECIFICS. ARE THERE ARE YOU
ABLE TO PARTICIPATE IN THAT IN A
WAY THAT YOU, UM THE FAIR PLAN
WILL HAVE A ROLE IN THAT AS
EXPECTED, OR ARE YOU RUNNING? I
WANT TO MAKE SURE THAT AT THIS
POINT IN TIME ARE WE RUNNING
INTO SOME CONCERNS THAT WE
SHOULD BE AWARE OF. AT THIS
POINT. WE HAVE REGULARLY
SCHEDULED MEETINGS WITH THE
DEPARTMENT AND MORE INDUS
REGULAR DISCUSSIONS WITH THEM
ABOUT THE PARTS OF THAT PLAN
THAT, UH APPLY TO US, SO I THINK
OUR NEXT STEP NOW IS TO
HOPEFULLY TURN SOME OF THIS INTO
ACTION. BUT WE'VE BEEN VERY
ENGAGED WITH THEM. THEY'VE BEEN
VERY WE'VE BEEN WORKING
COLLABORATIVELY WITH THEM ON THE
SUSTAINABLE INSURANCE STRATEGY,
EVERYTHING THAT APPLIES TO THE
FAIR PLAN PERSONALLY WOULD
APPRECIATE UPDATES AS THAT GOES
FORWARD TO MAKE SURE THAT THAT
IS CONTINUING. THANK YOU VERY
MUCH, MADAM CHAIR. SOME OF THE
PATERSON THANK YOU VERY MUCH,
UH, THANKS FOR COMING IN TODAY
AND WE HAD AN OPPORTUNITY TO
SPEAK WITH EACH OTHER AND IN MY
OFFICE AND APPRECIATED THAT
TIME. THE OTHER DAY, I MET WITH
A GROUP OF SPEAKING TO A GROUP
OF ONCOLOGY NURSES AND I AM
JOKED WITH THEM, BUT IT WAS
QUITE SERIOUS THAT YOU KNOW I'M
IN IN MY JOB. I'M HOPING TO PUT
THEM ALL OUT OF BUSINESS AND GO
IN ANOTHER FIELD. HOPEFULLY UM,
IS WE ADDRESS THINGS REGARDING
CANCER AND WHEN IT COMES TO UH
AH. THE FAIR PLAN. I DON'T WANT
TO PUT YOU OUT OF BUSINESS, BUT
I WOULD LIKE TO REDUCE YOUR BOOK
OF BUSINESS, PARTICULARLY FROM
MY DISTRICT. UM I WOULD SAY.
THERE ARE TWO ISSUES THAT I GET
A LOT OF CALLS ON THE TOP TWO
ISSUES, AND ONE OF THEM IS
PEOPLE LOSING THEIR INSURANCE
AND HAVING TO GO TO THE FAIR
PLAN, AND WE TALKED A LITTLE BIT
ABOUT, UM YOU KNOW WHAT? WHAT
THE RATES ARE AND DIFFERENT
REGIONS OF THE STATE. AND WHAT
FEEDBACK I'M GETTING IS THAT YOU
KNOW THEIR INSURANCE. THEIR
COSTS OF THEIR INSURANCE IS
GOING UP, YOU KNOW EXPONENTIALLY
WHEN THEY TRANSITION TO THE FAIR
PLAN, AND OBVIOUSLY HAPPY TO
PROVIDE INDIVIDUAL DETAILS, BUT
I DO PHILOSOPHICALLY. I
UNDERSTAND THE NEED TO HAVE, UH
SUSTAINABILITY IN THE BUSINESS
MODELS, SO THAT MAKES A LOT OF
SENSE. AND I FEEL THE SAME WAY
ABOUT, UM, THE VOLUNTARY
INSURANCE AS WELL. UM BUT JUST
TO ASK A COUPLE QUESTIONS ABOUT,
UH, ABOUT THE RATES AND THINGS
LIKE THAT, AND JUST THE EXPOSURE
AND, UM MY DISTRICT, WHICH IS
PLASTER AND ELDORADO COUNTY'S.
WE HAVE EXPERIENCED VERY LARGE
FIRES IN THE LAST COUPLE OF
WELL. NOT LAST YEAR,
UNFORTUNATELY, BUT PRIOR TO THAT
, CALDERON FIRE STARTED RIGHT
OUTSIDE MY DISTRICT, AND IT
REALLY IMPACTED EL DORADO COUNTY
AS YOU KNOW, AS WELL AS OTHER
COUNTIES. MOSQUITO FIRE LIST
GOES ON. AND SO THE PROSPECT OF
HAVING A BIG FIRE UNFORTUNATELY.
IN MY DISTRICT OR RIGHT OUTSIDE
MY DISTRICT IS NOT OUT OF THE
QUESTION OF THAT HAPPENING
SOMEDAY. SO IN THE EVENT THAT IN
ENTIRE BY THE WAY, AN ENTIRE
COMMUNITY BURNED DOWN RIGHT
OUTSIDE MY DISTRICT, GRIZZLY
FLATS, AND I WENT THERE AND I
SAW THE DEVASTATION THAT
HAPPENED. AS WELL. AND YOU KNOW,
WE'VE BEEN TRYING TO HELP AS
MUCH AS WE CAN. BUT SO IT'S NOT
OUTSIDE THE REALM OF POSSIBILITY
THAT THERE WOULD BE A MASSIVE
FIRE WITH A LOT OF LOSSES OF THE
FAIR PLAN, ESPECIALLY AS PEOPLE
ARE LOSING THEIR INSURANCE OR
THE COST IS BECOMING
UNAFFORDABLE. AND SO MY QUESTION
IS IF THERE WERE LOSSES OF AN
EXTRAORDINARY AMOUNT IN A FIRE
WHERE PEOPLE ARE LARGE, YOU KNOW
, COVERED BY THE FAIR PLAN. A
LOT OF PEOPLE, YOU KNOW BILLIONS
OF DOLLARS $5 BILLION. WHAT
EXACTLY HOW WOULD YOU ADDRESS
THAT? AND WHAT WOULD THAT MEAN?
IN TERMS OF THE ASSESSMENTS TO
THE VOLUNTARY MARKET? UM OKAY,
SO HAVE TO THINK ABOUT HOW TO
ANSWER THAT THE WAY THE
ASSESSMENTS WORK IS, UM, IF
THERE WAS GOD FORBID A LARGE
FIRE AND WE'RE TALKING, YOU
KNOW, YOU SAID $5 BILLION WILL
USE THAT AS THE NUMBER RIGHT $5
BILLION THE WAY IT WOULD WORK IS
WE'D USE WHATEVER CAPITAL WE
HAVE ON HAND TO COVER THE LOSSES
AS THEY WERE COMING IN. WE WORK
WITH MODELERS WHO THEN LOOK AT
OUR FOOTPRINT AND TELL US WHAT
OUR EXPOSURE ISN'T THAT AREA.
AND WHERE THE FIRE'S MOVING, AND
SO WE START TO TRY TO, UM, PLAY
OUT THE SCENARIO OF WHAT IS IT
GOING TO LOOK LIKE? WHAT ARE OUR
LOSSES GOING TO BE? WHEN WE GET
TO A POINT WHERE WE SAY WE DON'T
HAVE ENOUGH MONEY, RIGHT? THIS
IS GOING TO RUN INTO THE
BILLIONS OF DOLLARS AND WE DON'T
HAVE BILLIONS OF DOLLARS. UM,
WE, YOU KNOW, MY FINANCIAL
PERSON COMES TO ME AND SAYS, HEY
, THIS ISN'T GONNA WORK. WE
DON'T HAVE ENOUGH MONEY. AND I
SAY, OKAY, LET'S GO TO THE
ACCOUNTING COMMITTEE, WHICH IS A
SUBCOMMITTEE OF OUR BOARD AND WE
GO TO THE COUNTING COMMITTEE AND
WE SAY WE THINK WE NEED TO
ASSESS AND HERE'S WHAT WE THINK
WE NEED TO ASSESS THE ACCOUNTING
COMMITTEE SAYS OKAY, I TAKE IT
TO MY BOARD. MY BOARD SAYS YES.
SEND US A BILL. THEN WE TAKE IT
TO THE COMMISSIONER. AND THE
COMMISSIONER HAS TO SIGN OFF AND
SAY YES, WE BELIEVE YOU NEED TO
ASSESS SO THERE'S A CHECKS AND
BALANCES IN THAT TO MAKE SURE
THAT WE'RE NOT ASKING FOR MORE
MONEY THAN WE NEED, BUT IT'S
REALLY A TIMING GAME RIGHT IN
TERMS OF FIGURING OUT WHEN WE'RE
GOING TO NOT GOING TO HAVE
ENOUGH MONEY TO PAY THOSE LOSSES
AND THEN GOING OUT TO GET THAT
MONEY. SO IT'S OBVIOUSLY HARD TO
EXTRAPOLATE WHAT A $5 BILLION IN
A LOSS WOULD LOOK LIKE. BUT WHAT
DOES THAT MEAN? TO THE CARRIERS,
UM IN THE VOLUNTARY MARKET. I
MEAN, WHAT DOES THAT ACTUALLY
LOOK LIKE FOR THEM? SO UM, SO WE
WILL, SO WE DO HAVE REINSURANCE.
SO THAT'S PART OF THE EQUATION,
TOO. SO WHEN WE LOOK AT HOW MUCH
WE HAVE TO PAY, WE'RE ALSO
LOOKING AT HOW MUCH ARE WE
INSURERS HAVE OUR REINSURANCE
THAT WORKS A LITTLE DIFFERENTLY
THAN, SAY, OTHER INSURANCE
COMPANIES, SO TYPICALLY, YOU
WOULD BUY AMOUNT OF REINSURANCE.
WE BUY X AMOUNT OF REINSURANCE,
BUT THERE'S NOT AS MUCH
REINSURANCE AVAILABLE FOR THE
WILDFIRE RISK. SO ALTHOUGH WE
HAVE REINSURANCE AND WE GO OUR
TOWER GOES ALL THE WAY UP TO
$4.5 BILLION. WE DON'T HAVE $4.5
BILLION OF COVERAGE BEFORE WE
HAVE TO ASSESS. SO WELL AS WE'RE
GOING THROUGH THE TOWER, EACH
KIND OF LAYER OF INSURANCE THAT
WE PURCHASE. PART OF THAT IS UM
IS CO REINSURANCE, WHICH WILL BE
COVERED BY THE VOLUNTARY MARKET
BECAUSE WE DON'T HAVE MONEY TO
COVER THAT SO WE COULD GET TO A
BILLION DOLLARS. AND HAVE TO
ASSESS THE VOLUNTARY MARKET FOR
THAT, AND WHEN WE ASSESS TODAY
ONCE WE GO THROUGH THAT PROCESS,
AND THE VOLUNTARY MARKETS HAVE
30 DAYS TO SEND US THE MONEY.
THE WAY THAT WE DETERMINE HOW
MUCH TO BILL EACH COMPANY IS WE
LOOK BACK TWO YEARS. UM SO AT
THE START OF EACH FISCAL YEAR,
WE'RE GOING TO YEARS PRIOR AND
WE'RE LOOKING AT WHAT THE MARKET
SHARE WAS FOR EACH COMPANY FOR
THOSE THAT TIME PERIOD AND WE
SAY, OKAY, SO COMPANY X HAD A
10% MARKET SHARE. WE'RE GONNA
WE'RE GONNA SEND THEM 10% OF THE
$5 BILLION BILL OR WHATEVER THE
BILL IS, SO THAT'S HOW IT WORKS.
AND THEN THEY HAVE 30 DAYS TO
SEND IT BACK TO US. UM THEY CAN.
THE COMPANIES CAN GET RIGHT OUT
CREDITS SO WE THEY KNOW EXACTLY
WHAT MARKET SHARE OR WHAT
PERCENTAGE THAT THEY'RE
RESPONSIBLE FOR, BECAUSE WE SEND
THAT OUT TO THEM, BUT THEY SENT
US BACK A LIST AND THEY SAID,
HEY, HERE'S ALL THE POLICIES
THAT I WE ALREADY RIGHT IN THE
WILDFIRE AREAS. THEY GET CREDIT
AGAINST THAT. AND THEN WE
REALLOCATE THAT PERCENTAGE. SO
THEY'RE FULL MARKET SHARE MIGHT
BE 10% THEY MIGHT ONLY GET 9% OF
THE ASSESSMENT IF THEY WRITE
ENOUGH IN THE WILDFIRE AREAS. UM
AND SO THEN THEY GET A BILL FOR
THAT PERCENTAGE. THE COMPANIES
WHO ARE WRITING BUSINESS TODAY,
OR EVEN COMPANIES HAVE PULLED
OUT COMPLETELY AND ARE NON
RENEWING POLICIES ARE STILL PART
OF OUR ASSOCIATION FOR TWO
YEARS. SO BECAUSE WE GO BACK TWO
YEARS, IT'S POSSIBLE THAT A
COMPANY WHOSE PULLED OUT OF
CALIFORNIA COMPLETELY STILL GETS
A BILL. SO JUST FOR
CLARIFICATION ON THE MARKET
SHARE? UM IS IT GENERALLY
SPEAKING, DO YOU SAY ITS MARKET
SHARE IN CALIFORNIA OR MARKET
SHARE OF WHERE THE LOSSES WERE
MARKET SHARE IN CALIFORNIA?
OKAY. YEAH, UM SO JUST A COMMON
IS THAT UM, JUST, YOU KNOW, LAST
WEEK AND FORTUNATELY, I WAS
INFORMED THAT MY CARRIERS
LEAVING, UM, CALIFORNIA
ALTOGETHER. AND SO I MIGHT BE A
CUSTOMER. SOON FOR ALL I KNOW.
UM, BUT THE THEY PROSPECT OF BIG
LOSSES LIKE THIS IN A COMMUNITY
LIKE MINE WHERE I THINK PEOPLE
ARE VERY, VERY DEPENDENT ON THE
FAIR PLAN, AND HOW THAT
DISINCENTIVIZE IS OUR IT'S YOUR
POTENTIAL ASSESSMENT AND MAKE OF
LARGE LOSSES WHERE THAT COULD
HAPPEN. THAT COULD HAPPEN IN MY
DISTRICT. THE FAIR PLAN HAS SUCH
HUGE EXPOSURE IF THERE'S A BIG
FIRE, UM THE AMOUNT OF
ASSESSMENTS I WOULD GO AND HOW
THAT KIND OF LIKE DISINCENTIVIZE
IS EVEN MORE, UH, FOR THOSE
COMPANIES TO MAYBE OFFER
INSURANCE IN CALIFORNIA AT ALL.
AND, UH, SO I HAVE A WE NEED.
OBVIOUSLY EVERYBODY KNOWS THIS.
WE NEED SUSTAINABLE BUSINESS
MODELS HERE IN CALIFORNIA.
THAT'S KIND OF THE PRIMARY THING
, BUT I CAN'T STRESS ENOUGH. UM
YOU KNOW, I KNOW MY COLLEAGUES
ALL KNOW ABOUT THIS. I'M SURE
EVERYBODY'S GETTING CALLS. UM
AND I DON'T KNOW TO WHAT EXTENT
EVERYBODY IS. I KNOW THERE'S
PROBABLY EVERYBODY'S A LITTLE
DIFFERENT. I'VE ASKED AROUND A
LITTLE BIT, BUT THE AMOUNT OF
CALLS THAT I GET REGARDING
PEOPLE HAVING TO MOVE TO THE
FAIR PLAN AND WHAT THAT COST IS
IN MY DISTRICT IS DAILY. AND, UH
, SO YOU KNOW, WE'RE NOT
THINKING ABOUT I'M NOT
PERSONALLY THINKING ABOUT HEY,
LET'S COME UP WITH SOMETHING
THAT WE'RE GOING TO DO, YOU
KNOW, 2026 AND MAYBE 2029 ONCE
REGULATIONS, MAYBE, OR SOME DAY
OR PROMULGATED. I MEAN, THIS IS
LIKE, PEOPLE ARE CAN'T AFFORD TO
LIVE. UM AND THIS IS A MAJOR
COMPONENT OF THAT. SO UM, SO I
THINK THERE'S A FOR ME. THERE'S
A HUGE SENSE OF URGENCY. I'M
STILL THE NEW GUY HERE. UM AND
THIS COMMITTEE. THIS IS
LITERALLY MY FIRST COMMITTEE
MEETING HERE SO, BUT IT IS
SOMETHING THAT EVERY DAY COMES
UP IN MY OFFICE. SO UM, THANK
YOU FOR YOUR TIME AND ANSWERING
MY QUESTIONS. ABSOLUTELY. SOME
OF THEM. WHERE DID YOU HAVE
ANOTHER QUESTION? THANKS FOR
LETTING ME TAKE ANOTHER BITE AT
THE APPLE HERE. UM SO LISTENING
TO QUESTIONS THAT MR
ASSEMBLYMEMBER'S GIBSON RAISED
MAKES ME THINK WE'RE ON TRACK
HERE, TOO. MAYBE GET TO 500,000
POLICIES NOT TOO DISTANT FUTURE.
IT'S NOT UNLIKELY WORK GROWING
AT ABOUT A RATE OF 27% YEAR OVER
YEAR. UM I THINK OUR PROJECTION
FOR THIS FISCAL YEAR WHICH ENDS
IN SEPTEMBER OF 2020, FOR OUR
PROJECTION IS 400 WAS 404,000
POLICIES. I'M PRETTY SURE WE'RE
GONNA SIT. WE'RE GOING TO GO
BEYOND THAT. BUT THAT WAS OUR.
UM THAT WAS OUR PROJECTION GIVEN
WHERE WE WERE IN JULY OF 2023
WHEN WE MADE THOSE PROJECTIONS.
SO YOU'RE COVERING ABOUT OVER
$300 BILLION AND ASSETS. HOW
MUCH CASH ON HAND? DO YOU HAVE?
SO UH, AGAIN, SURPLUSES ABOUT
200 MILLION CASH ON HAND IS
SOMEWHERE IN THE NEIGHBORHOOD IS
700 MILLION. SO A TINY
PERCENTAGE OF WHAT YOUR EXPOSURE
IS, YEAH. AND HOW MUCH
REINSURANCE DO YOU BUY? SO OUR
TOWER GOES UP TO 4.8 BILLION.
THE ACTUAL AMOUNT OF REINSURANCE
IS ABOUT $2.5 BILLION, SO WE
PURCHASED SO HOW DOES THIS
COMPARE TO OTHER CARRIERS? UM,
WE CAN WE USUALLY LOOK AT OTHER
RESIDUAL MARKETS. VERSUS OTHER
CARRIERS BECAUSE WE'RE A SINGLE
PERIL OF WILDFIRE IN OUR
REINSURANCE, SO WE COMPARE TO
OTHER RESIDUAL MARKETS ACROSS
THE COUNTRY. MOST MARKETS, UM
WILL CARRY BETWEEN 100 YEAR OR A
250 YEAR EVENT. SO 100 YEAR
EVENT MEANS THAT THAT THE FIRE
FOR US, WHICH IS ABOUT $5
BILLION IS AN EVENT THAT'S GOING
TO HAPPEN EVERY 100 YEARS. IT'S
LIKELY TO HAPPEN, RIGHT? SO UM,
WE NOW HAVE GONE TO 100 YEAR
EVENT, WHICH WE'VE NEVER HAD
THAT MUCH REINSURANCE BEFORE. UM
LAST YEAR BY COMPARISON, WE HAD
ABOUT $1.7 BILLION IN THIS YEAR
WHERE, LIKE $2.5 BILLION THAT WE
PURCHASED, UM OURS IS LOW
COMPARED TO OTHER RESIDUAL
MARKETS BASED ON THE EXPOSURE
THAT WE HAVE AGAIN BECAUSE WE
HAVE A LOT OF CO REINSURANCE AND
THAT $5 BILLION TOWER WHERE UM,
YOU KNOW, WE'RE ARE OUR
DEDUCTIBLE OR RETENTION IS 900
MILLION, WHICH IS MORE THAN THE
700 MILLION. I TOLD YOU WE HAVE
ON HAND. UM BUT YOU KNOW, IT HAS
TO BE ONE EVENT, TOO, SO WE
COULD EASILY BE AN ASSESSMENT
TERRITORY IF WE HAD THREE SMALL
FIRES, RIGHT? BECAUSE WE'RE NOT
GOING TO HIT A REINSURANCE SO
WE'D HAVE TO ASSESS TO GET
THROUGH THOSE THREE FIRES. BUT I
THINK, UM TO GIVE YOU KIND OF
CONTEXT TO BECAUSE WE'RE TALKING
ABOUT, YOU KNOW? WELL YOU KNOW,
GOD FORBID WE GET A FIRE AND
LIKE ARROWHEAD, RIGHT? $8
BILLION. IF YOU LOOK AT WHERE,
UM IF YOU LOOK AT THE PARADISE
FIRE THAT HAPPENED AND YOU LOOK
AT ABOUT 45 MILES SOUTH OF THAT
AREA IF THAT BURNED TODAY THAT
SAME FIRE FOOTPRINT THAT FIRE
MAP THAT HAPPENED IN PARADISE AT
THAT BURNED TODAY ABOUT 45 MILES
FROM THERE, WE WOULD HAVE OVER
$6 BILLION IN LOSSES. GIVES YOU
ANY SENSE OF KIND OF WHAT WE'RE
LOOKING AT. HMM YEAH, I GUESS I
GUESS I STARTING TO THINK ABOUT
THE INCREASING NUMBER OF
POLICIES, THE NUMBER AH, YOU
KNOW HOW HOW YOU HOW THE
REINSURANCE WORKS, UM I JUST I
FEEL LIKE I GUESS I'M CONCERNED
THAT YOU KNOW, WE'RE LIKE ONE
BAD FIRE SEASON AWAY FROM
COMPLETE INSOLVENCY IS WHAT IT
FEELS LIKE TO ME. UNLIKE
COMMERCIAL CARERS, YOU CAN
ASSESS THE COMMERCIAL CARRIERS
FOR THAT, UM AND THAT'S A, UM
THAT'S THAT'S A REALLY,
OBVIOUSLY A REALLY UNUSUAL MODEL
. FROM MY PERSPECTIVE. UM, BUT
IT YOU KNOW, CAREFUL HOW I
CHARACTERIZE THIS, BUT IT IT'S
UM IT FEELS LIKE IT FEELS LIKE A
BIG GAMBLE IN MANY WAYS. QUITE
FRANKLY, UM, YOU KNOW, IF WE'RE
ON WALL STREET, I'M NOT SURE
YOU'D BE ABLE TO BE ABLE TO GET
AWAY WITH THIS. I HAD A, UM A
MEMBER OF THE VOLUNTARY MARKET
TOLD ME IF I COULD PICK A
COMPANY TO REINSURE YOU WOULD
NOT BE THE ONE SOMETHING. I
AGREE WITH YOU BECAUSE IT'S NOT
YOUR RIGHT. IT'S A GAMBLE, RIGHT
AND WE ARE ONE EVENT AWAY FROM A
LARGE ASSESSMENT. THERE'S NO
OTHER WAY TO SAY IT BECAUSE WE
DON'T HAVE THE MONEY ON HAND.
AND WE HAVE A LOT OF EXPOSURE
OUT THERE, AND THERE'S TWO PARTS
TO DOING THIS RIGHT. ONE IS THAT
WE GET THE RATES SO AT LEAST
WERE IN A BETTER FINANCIAL
POSITION THAN WE ARE TODAY AND
STILL AGAIN. THAT'S A EVEN IF
THEY EVEN IF TODAY, THEY TOLD ME
CHARGE WHATEVER YOU WANT. IT'S
STILL 2025 AT BEST BEFORE I
START CHARGING THAT RIGHT IN
2026 TILL I REALLY GET THAT RATE
INTO MY SYSTEM. BUT THAT'S ONE
PIECE THAT'S A BIG PIECE OF IT,
AND THEN THE OTHER PIECES,
REDUCING THE EXPOSURE. GETTING
PEOPLE BACK OUT INTO THE
VOLUNTARY MARKET, AND THEY HAVE
TO PLAY TOGETHER. RIGHT IN ORDER
TO DO THAT, AND UNFORTUNATELY
TODAY, THERE'S JUST NOT A LOT OF
OPTIONS FOR PEOPLE AND WHERE TO
GO. I GUESS I HAVE YOU KNOW, I
CAN UNDERSTAND THE CONCERNS OF
THE ADMITTED CARRIERS, EVEN
THOUGH NOT ADMITTED CARRIERS TO
WRITE POLICIES IN IN IN
CALIFORNIA. UM KNOWING THE RISK
AND THEN NOW AND THEN KNOWING
THE RISK OF ALL THE ASSESSMENTS
THAT THEY COULD BE SUBJECT TO
BASED ON ON POTENTIAL LOSSES
HERE. I LIKE I SAID, I THINK IF
WE'RE THIS WAS ON WALL STREET, I
DON'T KNOW THAT. I. IT I DON'T
SEE HOW IT WOULD STAND MASTER.
NO IF WE IF WE WERE A REGULAR
INSURANCE COMPANY, WE FIRST WE
COULDN'T WE COULDN'T GROW AT
THIS RATE BECAUSE WE COULDN'T
AFFORD TO GROW AT THIS RATE, SO
YOU'RE ABSOLUTELY RIGHT. IT'S A
SIGNIFICANT CONCERN. AND I
UNDERSTAND I CAN. YEAH. UM AND I
JUST THINK OF, I'LL THINK OF
ANOTHER THING, TOO, YOU KNOW?
COMMERCIAL CARRIERS, UM
TRADITIONAL TRADITIONAL CARRIERS
, UM, HAVE A REALLY HARD TIME
GETTING THEIR RATE FILINGS DONE
IN A TIMELY MANNER. UM UH, FOR A
NUMBER OF REASONS. I THINK
THERE'S STILL 90 PLUS. FILINGS
HAVE BEEN SITTING OUT THERE FOR
MONTHS AND MONTHS AND MONTHS. UM
DO YOU HAVE THE SAME? CHALLENGES
GETTING YOUR RIGHT RATE FILINGS
ONTO AND YOU ARE THE CARRIER OF
LAST RESORTS WILL NOT ANYMORE.
YOU'RE NOT. UM YOU'RE THE
CARRIER OF ONLY RESORT FOR SO
MANY PERIOD PEOPLE PERIOD WERE
ACTUALLY THE FIRST RESORT IN
SOME CASES. SO ARE YOU HAVING
THE SAME DIFFICULTY IN GETTING
TIMELY FILING RATE FILINGS? WE
ARE PART OF THAT, I WILL SAY IS
BECAUSE, UM, WE'RE WORKING OFF
OF THINGS THAT HAPPENED 30 YEARS
AGO THAT NOBODY HAS ANY
DOCUMENTATION AROUND RIGHT WHEN
WE WERE THE REALLY THE CARRIER
OF LAST RESORT AND A SMALL
CARRIER. PART OF IT IS UM, WHEN
WE DO OUR WHEN WE DID OUR LAST
RATE FILINGS, THE DEPARTMENT I
TOOK THE OPPORTUNITY TO GO
THROUGH. EVERYTHING WE DO VERSUS
JUST THE RATE FILING, SO IT'S
NOT JUST THE RIGHTS. IT WAS. THE
UNDERWRITING GUIDELINES WAS THE
PROCESSES IT WAS REINSURANCE. IT
WAS ALL OF IT. AND SO WHEN YOU
START KIND OF GOING THROUGH ALL
OF THAT, SO IT TOOK 25 MONTHS TO
GET OUR RATE FILING APPROVED.
WHAT WE'RE DOING NOW IS WE'RE
TRYING TO WORK WITH THEM AND DO
A LOT OF PRE WORK. THAT'S WHY WE
DID THE PROPOSAL FOR THE $20
MILLION PER STRUCTURE TO SAY
THIS IS HOW WE THINK IT WOULD
WORK. THE REINSURANCE. WE'VE
GIVEN THEM. SOME INITIAL
ANALYSIS OF HERE'S WHERE WE
THINK THE NUMBERS WOULD COME IN,
AND THIS IS WHAT IT WOULD LOOK
LIKE IF WE WERE TO ADD THE NET
CAST OF REINSURANCE INTO OUR
RATES SO WE CAN DO A LOT OF PRE
WORK AND WE'RE HOPING THAT
TOGETHER WE CAN WORK ON THAT. SO
WHEN WE DO THE FILING AND IT
GOES IN, IT'S A MUCH SMOOTHER
PROCESS. SO HERE FROM COMMERCIAL
CARRIERS, UH VARIETY OF THEM,
NOT JUST A SINGLE THAT AND WE
HEAR FROM THE INSURANCE
COMMISSIONER THAT ONE OF THE
REASONS THAT THE RATE FILINGS
TAKES SO LONG IS THAT THEY ARE
SUBMITTED INCOMPLETE INFORMATION
THERE. THE APPLICATIONS ARE
INCOMPLETE. WHAT I HEAR FROM THE
CARRIERS IS THAT THEY'D LIKE TO
SUBMIT COMPLETE APPLICATIONS IF
THEY COULD ONLY GET ACCESS TO
THE TOOLS THAT THE INSURANCE
COMMISSIONER USES TO, TOO, BUT
THEY'RE NOT ALLOWED TO DO THAT.
UM IS THAT SOMETHING YOU EXT
YOU'VE EXPERIENCED AS WELL. OR
IS THIS PRE PLANNING PART OF THE
APPRECIATE YOUR PROCESS UNIQUE
AND DIFFERENT THAN WHAT'S
HAPPENING? LITTLE BIT DIFFERENT
THAN THEM. ALTHOUGH WE DO USE
THE SAME RATE TEMPLATES AND SUCH
THAT THEY USE, WE USE THAT NOT
BECAUSE WE HAVE TO, BUT BECAUSE
IT MAKES IT EASIER FOR THE
DEPARTMENT. SO WE'VE DONE SOME
MEETINGS WITH THEM AROUND OUR
LAST RATE FILING TO SAY, CAN YOU
SHOW US WHAT LEVERS YOU PULLED
WHAT YOU DID TO GO FROM 48.8 TO
15.7 SO THAT WHEN WE DO THE NEXT
FILING, WE CAN IDENTIFY THOSE
SAME ISSUES UP FRONT. SO WE'RE
NOT GOING DOING THIS BACK AND
FORTH, SO WE'RE TRYING TO DO
SOME OF THAT WORK WITH THEM NOW,
BUT I WOULD AGREE. IT'S NOT A
VERY SMOOTH AND EASY PROCESS. UM
I THINK THEY'RE YOU KNOW, LIKE I
SAID, THEY'RE DEFINITELY WORKING
WITH US TO FIGURE OUT WHERE WE
FALL INTO THAT. AND SO WHEN WE
TALK ABOUT 14 MONTHS, WE'RE
TALKING ABOUT FOUR MONTH
TURNAROUND. APPROVAL FROM THEM.
UM AND WE'RE HOPEFUL THAT WE CAN
GET THERE BY DOING THIS PRE WORK
WITH THEM. AND ONE FINAL
QUESTION. EASY. SIMPLE PROBABLY
YES OR NO, UM, CONSUMER WATCHDOG
AND INTERVENER IN YOUR PROCESS.
THEY ARE NOT BECAUSE WE'RE NOT
SUBJECT TO PROP 103. THANK YOU.
THANK YOU, MADAM CHAIR.
APPRECIATE IT. THANK YOU. DO WE
HAVE ANY OTHER QUESTIONS? WITH
SOME SOME KIND OF SOME WOMEN
DON'T SWEAR HIGH. UM AND I'M
SORRY I'M LATE, BUT I DO THE
BUNCH OF STUFF I NEEDED TO TAKE
CARE OF. I'M FROM LOS ANGELES.
AND I USED TO BE THE DIRECTOR OF
REAL ESTATE FOR THE CITY OF LOS
ANGELES. AND I USED TO STAY UP
NIGHTS BECAUSE THE DEPARTMENT OF
WATER AND POWER WHICH HAD A VAST
NUMBER OF LAND AND RESOURCES IN
THE CITY OF L. A TO HAD LAND
THAT WAS IN AREAS THAT HAD A LOT
OF BRUSH. CLEARANCE OR BRUSH
FIRES, AND THEY WOULDN'T CLEAR
IT AND THEY WOULD HAVE ACTUARIAL
COME IN. AND THEY WOULD DO A
COST BENEFIT ANALYSIS OF BUT
JUST SAY WOULD COST THE CITY OF
LOS ANGELES. UH $50 MILLION IN A
BUDGET YEAR WHERE THEY DIDN'T
HAVE THE MONEY TO DO THE
CLEARANCE. AND THEN SOMEONE
WOULD SAY WELL, IF THERE WERE A
FIRE, YOUR EXPOSURE WOULD ONLY
BE $5 MILLION IN $10 MILLION
WOULD TAKE THE LOSS OF LIFE LOSS
OF PROPERTY ALL THAT EXPOSURE
UM, I WOULD IMAGINE. UM WHAT
WOULD PROBABLY MAKE YOUR JOB
EASIER IF WE DID A LOT OF
PREVENTATIVE THINGS LIKE
BRUSHFIRE CLEARANCE, LIKE, UM,
STABILIZING THE HILLSIDES LIKE,
UM SPRINKLR IZATION. THERE'S A
THERE'S A PLETHORA OF THINGS
THAT WE CAN DO. THAT COST. BUT
IF WE DID IT IF WE DID THE SAME
KIND OF ACTUARIAL KIND OF
ANALYSIS. IT MIGHT SHOW THAT IF
WE INVEST X AMOUNT OF DOLLARS
INTO PREVENTION. OVER A PERIOD
OF TIME IT COULD SAVE I DON'T
KNOW IF ANYBODY'S EVER DONE
THAT. HOW MUCH MONEY WOULD IT
SAVE US IN POTENTIAL DAMAGE IN
LIFE AND LIMB AND PROPERTY? AND
WITH THAT SAVINGS, COULD WE
LOWER OR GET INSURANCE COMPANIES
TO COME BACK IF WE'RE
PROACTIVELY TRYING TO REDUCE
THEIR EXPOSURE, AND DON'T
WHENEVER I HEAR I'VE BEEN GOING
THROUGH A READING THIS I'M GOING
THROUGH A LOT OF THIS. THAT
DOESN'T SEEM TO BE A LOT OF
DISCUSSION. ABOUT WHAT WE CAN
DO, PROACTIVELY. UM TO REDUCE
OUR EXPOSURE TO CATASTROPHIC
WHERE IT'S LIKE IT'S GOING TO
HAPPEN. YOU KNOW IT'S GOING TO
HAPPEN, SO LET'S LET IT HAPPEN
WELL. WE SHOULD BE A LITTLE
MORE. PROACTIVE I BELIEVE IN
DOING THAT. AND DO YOU HAVE IF
YOU THOUGHT ABOUT THAT. LOOK AT
THAT AND THOUGHT ABOUT THE WAY
THAT WE CAN STOP. OR HINDER. OUR
AMELIORATE A LOT OF THIS IF
WE'RE ABLE TO, UH AND I KNOW WE
DON'T HAVE MONEY. BUT THIS THIS
THIS, BUT THIS COULD BE MONEY
THAT IS WELL SPENT. I MEAN,
UNBELIEVABLY WELL SPENT IF WE
DID IT. SO I THINK THERE ARE A
LOT. THERE ARE A NUMBER OF
GROUPS WORKING ON THOSE ISSUES
RIGHT. BOTH GOVERNMENT GROUPS
AND PRIVATE GROUPS THE HOME
HEARTENING DISCOUNT WE PROVIDE.
IS THAT AN INDIVIDUAL RISK LEVEL
RIGHT, SO IT'S NOT GOING TO
PROVIDE, UM AS ASSEMBLYMEMBER'S.
PATTERSON WAS TALKING ABOUT A
BRUSH FIRE SWEEPING THROUGH. A
UM CITY OR SUBURB RIGHT? IT'S
NOT GOING TO PREVENT THAT. BUT
IT WILL PREVENT WHEN YOU'RE OUT
IN RURAL AREAS OR YOU'RE IN
THOSE SUBURBS AND THE FIRES ARE
AROUND YOU. WHAT WE FIND IS WE
GET THE ONE OFF FIRES BECAUSE
THE EMBERS ARE FLOATING THROUGH
WITH THE WIND, AND THEY'RE
CATCHING HOMES ON FIRES. I V H S
IS AN ORGANIZATION WHO DOES A
LOT OF THAT RESEARCH. AND
THEY'RE THE ONES WHO WHO
DEVELOPED THE CURRENT
REQUIREMENTS FOR THE DISCOUNT
WHERE THEY SAID IF YOU DO THESE
THINGS WRITE. YOUR HOUSE IS
REALLY LESS LIKELY TO BE THE ONE
THAT THOSE EMBERS CATCH ON FIRE.
AND IF AND I ENCOURAGE YOU IF
YOU HAVEN'T TO GO ONTO THEIR
WEBSITE, THEY HAVE SOME REALLY
COMPELLING VIDEOS ON THERE ABOUT
HOW THEY'VE DONE THEIR RESEARCH
AND HOW THIS PLAYS OUT. YOU
KNOW, IF I HAVE A STUCCO HOUSE
WITH A STUCCO ROOF, MY BELIEF IS
IT'S NEVER GONNA BURN RIGHT
BECAUSE IT'S A STUCCO HOUSE WITH
A STUCCO ROOF. MY HOUSE STUCCO
HOUSE STUCCO. I MEAN TILE ROOF,
BUT IT HAS A WOODGATE RIGHT?
THEY'LL SHOW YOU HOW THAT WOULD
GATE IS THE GATE THAT'S GOING TO
CATCH ON FIRE. RIGHT UM, SO
THAT'S ONE AREA AND THAT'S WHY
WE PROVIDE THE DISCOUNTS BECAUSE
NOT ONLY ARE WE UM IS IT A LESS
OF A RISK FOR US, BUT WE'RE
ENCOURAGING PEOPLE TO TAKE THOSE
MEASURES ON THEIR HOMES. THEN
THE FIRE SAFETY COUNCIL HAS UM
COMMUNITY LEVEL DISCOUNTS, SO
THEY'LL TELL YOU AS A COMMUNITY
WHAT YOU NEED TO DO. UM TO
REDUCE THE RISK OF WILDFIRE FOR
YOUR COMMUNITY. AND THEN CAL
FIRE ISN'T IS A BIG ONE.
OBVIOUSLY THEY HAVE A LOT OF
INFORMATION OUT THERE. SO THERE
IS INFORMATION OUT THERE. I
THINK THERE'S A LOT MORE THAT
NEEDS TO BE DONE. BUT THERE IS
SOME INFORMATION OUT THERE BUT
THAT EVEN OUR CUSTOMERS WILL
TELL YOU IT TAKES MONEY, RIGHT?
EVEN IF I'M AN INDIVIDUAL
HOMEOWNER, AND I WANT TO MAKE
CHANGES. IT TAKES MONEY FOR ME
TO MAKE THOSE CHANGES. BUT I
AGREE WITH YOU. IT'S AN
INVESTMENT WE'RE GOING TO NEED
TO MAKE. JUST LEAVE YOU WITH
THAT. THERE WAS A TIME WHERE
WHEN IT COMES TO AUTOS OR OR
INSURANCE. UM PEOPLE RESISTED
SEATBELTS. YEP. AND I DON'T KNOW
IF THERE'S BEEN A COST BENEFIT
ANALYSIS ON THE NUMBER OF LIVES,
AMOUNT OF MONEY AND ABOUT HOW
MUCH MONEY INSURANCE COMPANIES
HAVE SAVED FROM THAT. THERE'S
AIRBAGS. ONE ANOTHER HAS BEEN
ANALYSIS ON WHAT THAT EXACTLY
WHAT YOU'RE SAYING. ARE THERE
MATERIALS THAT WOULD MAKE IT
UNBELIEVABLY RESISTANT TO THE
MEMBERS THAT YOU'RE TALKING
ABOUT FIRES SO THAT IT WOULD
PREVENT IT FROM SPREADING? UM,
ESPECIALLY AT THE SPEED. IN
WHICH IT DOES I MEAN THAT THE
SPEED IN WHICH A FIRE THESE
WILDFIRES ARE UNBELIEVABLE, AND
THERE'S GOTTA BE A WAY. WE CAN
BUILD BARRIERS OR WERE DO A WAY
TO SLOW THAT UP, KNOWING THAT IT
WILL HAPPEN. JUST ASSUME IT WILL
HAPPEN, JUST LIKE WE ASSUME WE
WILL HAVE A CAR ACCIDENT AND WE
MADE BETTER CARS. WE'VE DONE
WHATEVER WE NEED TO DO. SO UM I
WOULD LOVE TO WORK WITH SOMEBODY
ON THAT. I DON'T KNOW WHO IT IS
TO BE ABLE TO DO THAT. QUÊ
SOMEONE, ALVAREZ. YEAH LIKE TO
SCHEDULE A FOLLOW UP WITH YOU TO
TALK. MORE MORE DETAILS ON THIS,
BUT, UM, IS THERE A NUMBER THAT
AND I KNOW YOU TOLD ME YOU'D GO
BACK AND MAYBE DO SOME RESEARCH
ON THIS ON HISTORICAL. BUT IS
THERE A NUMBER THAT YOU TRY TO
REACH IN TERMS OF, UM, HOW MUCH
UH, REVENUES BEING GENERATED. ON
AN ANNUAL BASIS PER POLICY. I
MEAN, AT THIS POINT IF YOU HAD I
DID ROUGH $300 BILLION LIABILITY
. HALF A MILLION UM
POLICYHOLDERS. IN ORDER TO COVER
THE COMPLETELY OF COURSE, IT
DOESN'T WORK THIS WAY. BUT YOU
COVER THE COMPLETE LIABILITY.
THAT'S A $600,000 PER POLICY,
WHICH OBVIOUSLY AGAIN DOESN'T
WORK THAT WAY. BUT IS THERE A
NUMBER THAT YOU HOPE TO GET TO
OR THAT YOUR ACTUARIAL ANALYSIS
DEMONSTRATES. THAT WOULD BE A
MORE EVERYTHING. OBVIOUSLY EVERY
EXTRA DOLLAR IS BETTER BECAUSE
IT MAKES THE MARKET OR MAKES THE
LIABILITY LESS RISKY, BUT ARE
YOU TRYING TO GET TO A SPECIFIC
NUMBER IS THERE HAS THERE BEEN
DIRECTION GIVEN IN THE PAST TO
GET TO SPECIFIC NUMBER? THAT'S
THE FIRST QUESTION YOU CAN
ANSWER YES OR NO WHEN WE CAN
TALK MORE ABOUT IT LATER. AND
THEN THE SECOND QUESTION IS
WITHOUT AGAIN, REALLY MIMICKING
OR TRYING TO BECOME A VOLUNTARY
INSURANCE PRODUCT. UM WHEN YOU
DO HAVE THE PROFITS OR THE YOU
KNOW, AT THIS POINT, YOU SAID
200 MILLION IN EXCESS. IS THERE
A WAY TO? I DON'T KNOW WHAT
YOU'RE DOING WITH THAT IF IT'S
HELD IN CASH, OR IF IT'S
INVESTED IN SOME WAY, BUT IS
THAT SOMETHING THEY HAVE THE
AUTHORITY TO DO OR NOT, AND HAVE
YOU EVER SEEKED THE OPPORTUNITY
TO DO THAT? UM OKAY. SO FOR THE
FIRST PART OF THE QUESTION,
THERE IS NO UM, SPECIFIC NUMBER.
IT'S EVERY TIME WE DO. A RATE
ANALYSIS. WE GO BACK. THAT'S
WHEN WE COME UP WITH THE NUMBER
TO SAY. YOU KNOW, IN 2021, IT
WAS, YOU KNOW IF WE IF WE REALLY
WANT TO DO INSURE TO THE
ACTUALLY SOUND RATES WE WERE,
YOU KNOW, 70% INCREASE, RIGHT
AND THEN WE ASKED FOR THE 48.8.
RIGHT NOW WE'RE DOING THE SAME
ANALYSIS TO SEE WHERE WE WOULD
BE. AND I DON'T I DON'T KNOW
WHAT THAT NUMBER WOULD BE. BUT
UM, WE'LL GO BACK TO THE
DEPARTMENT WITH HERE'S WHAT WE
BELIEVE WE NEED RIGHT. IT'S
NEVER GOING TO BE ENOUGH BECAUSE
YOU'RE NEVER GOING TO THINK
EVERYTHING IS GOING TO GO RIGHT,
SO, BUT IT WILL BE ENOUGH THAT
WE THINK WE CAN BUILD THAT
CAPITAL LAYER. THE CAPITAL LAYER
ITSELF THAT YOU'RE ASKING ABOUT
IN TERMS OF KIND OF BUILDING THE
WE HAVE. WE'VE JUST STARTED
HAVING THOSE DISCUSSIONS WITH
OUR BOARD. BECAUSE THAT'S A
DECISION. WE'RE GONNA HAVE TO
MAKE IT IN THE TALK WITH THE
DEPARTMENT ABOUT BECAUSE THE WAY
THE STATUTES SET UP IS WHAT IS
THE RIGHT CAPITAL STRUCTURE FOR
US IN ORDER TO MAKE SURE THAT
WE'RE STILL ABIDING BY THE
LEGISLATION AND THE STATUTES AS
WELL THAT THEY SHARE IN THE
PROFIT AND LOSSES BUT THAT WE'RE
AT A FINANCIALLY STABLE
POSITIONS SO THAT THAT RISK OF
ASSESSMENT IS LOWERED. THANK YOU
AGAIN. WE'LL FOLLOW UP. THANK
YOU. ABSOLUTELY. THANK YOU SO
MUCH FOR BEING HERE TODAY. WE
REALLY ENJOYED YOUR TESTIMONY
AND APPRECIATE YOU TAKING TIME
TO ANSWER ALL THE QUESTIONS THAT
THANKS FOR HAVING US. OKAY SO AT
THIS TIME, WE ARE GOING TO OPEN
IT UP FOR PUBLIC COMMENT. YOU
COULD PLEASE STATE YOUR NAME
AFFILIATION AND PROVIDE A BRIEF
REMARK. THANK YOU. HI MY NAME IS
MIKE. DEAR ELLIE, I'M THE
EXECUTIVE DIRECTOR FOR THE
AMERICAN AGENTS ALLIANCE. WE
REPRESENT TENS OF THOUSANDS OF
INSURANCE AGENTS THAT SELL AUTO
AND HOME INSURANCE REPRESENTING
THOUSANDS OF POLICYHOLDERS IN
YOUR DISTRICTS. AND I WANT TO
TELL YOU IT'S WORSE THAN I
THINK, YOU KNOW. YOU'RE GOING TO
HEAR FROM A LOT OF ANGRY
CONSUMERS AND INSURANCE AGENTS
INCREASINGLY WE HAVE NOTHING TO
SELL. CARRIERS. ARE NOT
AVAILABLE. THIS IS NOW THE
MARKET OF FIRST RESORT. VICTORIA
SHE'S DOING GOD'S WORK, BUT
SHE'S LIKE A SNAKE THAT
SWALLOWED AN ELEPHANT. AND IT IS
REALLY TOUGH. YOU KNOW, MARKETS
HAVE JUST DRIED UP SAFE CODE.
TRAVELERS CAMPERS. STATE FARMS
GONE. FARMERS HAS A LIMITED
APPETITE ALL STATE. THE BOTTOM
LINE IS WE NEED TO GET CARRIERS.
ADEQUATE RATES, EVEN THE MARKET
OF LAST RESORT. THEY TAKE 25
MONTHS TO GET A RATE APPROVED.
THEY NEEDED 70% THEY ASKED FOR
48. THEY GOT 15. THERE'S STILL
RATE INADEQUATE. HEMORRHAGING.
YEAH, IT'S A TICKING TIME BOMB.
AND AS POLICYMAKERS. YOU NEED TO
KEEP YOUR BOOT ON THE THROAT OF
THE DEPARTMENT. I'D BE HAVING
JOINT HEARINGS. EVERY 30 DAYS.
PUT TEETH. IN IT. I'D WANT
CONSEQUENCES, AND THINGS NEED TO
CHANGE BECAUSE STATISTICALLY, WE
ARE GOING TO HAVE A MAJOR. EVENT
AND MELTDOWN. THE NUMBERS DON'T
LIE. BUT WHATEVER YOU DO, WE
NEED THE PRIVATE MARKETPLACE TO
STEP UP TO TAKE THE LOAD OFF THE
MARKET OF LAST RESORT, AND UNTIL
MARKETS START WRITING AT
ADEQUATE PREMIUM. THERE IS NO
SOLUTION. SO I WISH I HAD BETTER
NEWS. YOU KNOW, WE NEED TO STAY
ENGAGED AND I WOULD ACT
VIGILANTLY TAKE THE GLOVES OFF
PROP 103. WHATEVER NEEDS TO BE
CHANGED. TO BE YOU KNOW,
PROVIDING AN EFFICIENT
PROCESSING OF RATE FILINGS.
CARRIERS CAN GET THEIR RATE. UM
THEY'RE NOT LYING TO YOU, AND
THEY'RE TELLING YOU WHAT THEIR
EXPERIENCE IS LIKE IN THE STATE.
I WOULD TAKE THEM AT THEIR WORD.
AND STAY ON THIS BECAUSE THIS IS
CRITICAL. WE HAVE NOTHING TO
OFFER CONSUMERS. AND IT CREATES
A FURTHER PROBLEM BECAUSE WHEN
WE CAN OFFER CONSUMERS
SOMETHING, IT'S EXPENSIVE. BUT
WE NEED CONSUMERS TO HAVE CHOICE
AND THERE NEEDS TO BE
COMPETITION BETWEEN CARRIERS.
THAT'S HOW THE CONSUMER WINS, SO
THANK YOU FOR YOUR TIME.
APPRECIATE IT. THANK YOU. HI
MADAM CHAIR. THANK YOU FOR
GIVING ME THE OPPORTUNITY TO
SPEAK FOR A MOMENT AND MEMBERS
OF THE COMMITTEE. MY NAME IS
CARL SUSSMAN. I'VE BEEN A BROKER
FOR 30 YEARS. PAUSED TO LOOK
SHOCKED AND SAY YOU MUST HAVE
BEEN A TEAM SOMETHING. UH AND I
WANTED TO JUST SHARE WITH YOU A
COUPLE OF QUICK THINGS ABOUT THE
CALIFORNIA FAIR PLANTS, AND
THAT'S PRIMARILY WHAT WE'RE HERE
FOR TODAY, AND I'VE NARROWED
DOWN TO THREE THINGS I CALL
THEM. THE THREE T S THAT WERE WE
NEED TO TRY AND FOCUS ON ONE IS
TRAINING AS YOU HEARD THERE, THE
NUMBER OF AGENTS THAT ARE
OFFERING THE FAIR PLAN HAS
BALLOONED. UP INTO THE 50,000
RANGE. AND THESE ARE PEOPLE THAT
HAVE PROBABLY NEVER WRITTEN NOT
PROBABLY WOULD NOT HAVE WRITTEN
A POLICY IN THE PAST AT ALL. SO
ALL OF A SUDDEN THESE PEOPLE ARE
WRITING POLICIES. THE LIKELIHOOD
OF THEM DOING IT CORRECTLY IS
PRETTY LOW. UM OR IMPOSSIBLE
WITHOUT TRAINING. SO WE NEED TO
TRY AND FIND A WAY I WOULD
SUGGEST MAYBE A CERTIFICATION
PROGRAM WITH THE RIGHT WITH ANY
OTHER INSURANCE COMPANY. YOU
HAVE TO SHOW THE CARRIER. YOU
KNOW THEIR PRODUCT. YOU KNOW HOW
TO QUOTE IT. YOU KNOW WHAT IT
COVERS. I WOULD SUGGEST MAYBE
THE SAME THING FOR THE FAIR
PLAN. THE NEXT THING IS, UM,
TECHNOLOGY, AS YOU KNOW, FAIR
PLAN IS SWITCHED TO A NEW SYSTEM
AND THAT'S BEEN PAINFUL AND
HOPEFULLY WE'RE GOING IN THE
RIGHT DIRECTION. NOW IT'S A
HORRIBLE WAY OF PUTTING IT INTO
THE PERFECT STORM. IT'S THE
CARRIERS AREN'T WRITING THE FAIR
PLANET HAS TO WRITE. MORE AND
MORE BROKERS ARE COMING AND THE
NEW SYSTEM, SO IT'S BEEN VERY
CHALLENGING. SO FOCUSING ON
TECHNOLOGY, AND I'M THRILLED TO
HEAR ABOUT THE NEW PHONE SYSTEM
COMING. THAT WOULD BE WELL TAKE
IT AND THAT'S WHERE WE ARE NOW.
RIGHT WERE THAT EXCITED BECAUSE
THE PHONES ARE GETTING UPGRADED.
THAT'S WHERE WE ARE. AND FINALLY
, THE LAST HE IS VER
TRANSPARENCY AND YOU KNOW AS
BROKERS AGAIN TO YOUR POINT
SINCE THIS IS WHERE WE GO NOW,
THIS IS OUR THIS IS THE
MARKETPLACE RIGHT HERE. UM FOR
US THAT HAVE MORE INFORMATION
FROM THE FAIR PLAN. MAYBE A LIST
THAT SAYS, HEY, THESE ARE THE
THINGS THAT WE'RE WORKING ON
TECHNOLOGY WISE. HEY THESE ARE
THE THINGS THAT WE'RE WORKING
ON. WE'RE GOING TO BE UPGRADING
THE PHONES. UM THESE ARE THINGS
THAT ARE GOING ON, JUST SORT OF
KEEP US IN THE LOOP. IT'S HARD
WHEN YOU'RE OUT THERE BECAUSE
WE'RE THE FACE TO THE CONSUMERS
WERE THE ONES WITH THE LICENSES
THAT HAVE TO EXPLAIN TO THE
CONSUMERS WHY THEY'RE GETTING
NON RENEWED. WHY THEY HAVE TO GO
WITH THE FAIR PLAN, AND YOU KNOW
MORE INFORMATION FROM FAIR PLAN
WOULD BE HELPFUL FOR US TO DO
THAT. THANK YOU. HI KIM STONE
STONE ADVOCACY ON BEHALF OF
CONSUMER WATCHDOG CONSUMER
WATCHDOG FEELS THAT THE ANSWER
TO THE INSURANCE INDUSTRY'S
WITHDRAWALS AND NON RENEWALS
THAT HAVE PUSHED NEARLY FOR OR
POTENTIALLY EVEN HIGHER PERCENT
OF CALIFORNIANS INTO THE FAIR
PLAN IS NOT TO FORCE EVERYONE
ELSE IN THE STANDARD OF
VOLUNTARY HOMEOWNERS INSURANCE
MARKET TO PAY EVEN MORE FOR
THEIR COVERAGE. THE WE THINK
THAT THE BEST WAY TO PUT THE
FAIR PLAN ON SOLID FINANCIAL
GROUND IS TO GET POLICYHOLDERS
BACK INTO THE VOLUNTARY REGULAR
HOMEOWNER'S INSURANCE MARKET
POTENTIAL WAY TO DO THAT IS TO
HAVE LEGISLATION REQUIRING
INSURANCE COMPANIES WHO OFFER
HOME AND CAR INSURANCE IN
CALIFORNIA TO DO SO TO EVERY
CALIFORNIAN WHO MEETS HOME
HARDENING GUARD GUIDELINES. KIND
OF LIKE THE HEALTH INSURANCE
REQUIRED MANDATE. UM THAT WAY
YOU COULD DEPOPULATE THE FAIR
PLAN AND REDUCED SOME OF THAT
RISK. PLEASE DON'T FORCE
HOMEOWNERS, RENTERS CONDO OWNERS
ACROSS THE STATE TO PAY FOR
EXCESS CLAIMS FOR THE SMALL
PERCENTAGE OF HOMES AND THE
RISKIEST PARTS OF THE STATE
ENSURED BY THE FAIR PLAN.
RENTERS AND LOWER AND MIDDLE
INCOME HOMEOWNERS WITH
COMPARATIVELY LOW FIRE RISKS
SHOULD NOT BE ON THE HOOK FOR
REBUILDING MORE EXPENSIVE HOMES
OR EVEN SECOND HOMES IN HIGH
FIRE RISK AREAS LIKE LIKE
ARROWHEAD OR TRUCKEE. WE ARE
VERY CONCERNED. ABOUT A
POTENTIAL ASSESSMENT TO
CONSUMERS. FOR EXAMPLE, A
COMPLETE LOSS FOR A FAIR PLAN
POLICIES IN LAKE ARROWHEAD COULD
AMOUNT TO A $975 SURCHARGE ON
EVERY OTHER INSURANCE POLICY.
AND IN THE UNLIKELY UM, EVENT
THAT ALL TOP FIVE FAIR PLANNED
CITIES SUFFERED EVENT AT THE
SAME TIME, THAT WOULD BE $3700
PER CALIFORNIA IN ENSURE PER
BILL. WE URGE THE COMMITTEE NOT
TO FORCE STRUGGLING FAMILIES
WITH LITTLE TO NO WILDFIRE RISK
TO PAY BILLIONS DEVELOP THE
INSURANCE COMPANY FOR ABANDONING
CALIFORNIA NEIGHBORHOODS. THANK
YOU. MORNING CHAIR MEMBERS. MY
NAME IS PETER ANSEL REPRESENTED
CALIFORNIA FARM BUREAU.
APPRECIATE THE FAIR PLAN COMING
AND TELLING US WHERE THINGS
STAND TODAY FOR FARMING AND
RANCHING MEMBERS IN THE STATE
INSURANCE HAS BECOME A MASSIVE
COST ISSUE IS DRIVING SMALL
FARMERS OUT OF BUSINESS IN THE
STATE. THE LATEST U. S CENSUS ON
AG SHOW THAT SMALL FARMS ACROSS
THE COUNTRY IN PARTICULAR IN
CALIFORNIA DECREASED BY OVER 20.
SO WE'RE LOSING. ARE SMALL FARMS
AND RANCHES WERE LOSING THE
DIVERSITY AND THE FOOD. WE GROW
AT A FAST RATE, AND THE COST OF
INSURANCE IS A BIG DRIVER OF
THAT, AS ASSEMBLYMEMBER'S WOULD
POINTED OUT, THE WINERY FOLKS
ARE OPERATING THEIR BUSINESSES
WITH SUBSTANTIAL EXPOSURE, SO
FIGURING OUT HOW TO INCREASE, UH
, PER STRUCTURE LIMITS IS REALLY
IMPORTANT, BUT AS
ASSEMBLYMEMBER'S JOHN SAWYER
POINTED OUT INVESTMENTS TO
MITIGATE FUEL RISK IS THE MOST
IMPORTANT THING WE THINK WE CAN
DO TO, UM, ONE HELPED DEPOPULATE
THE NUMBER OF POLICIES THAT ARE
EXISTING IN THE FAIR PLAN AND
THEN STEM THE COSTS FOR PEOPLE
THAT ARE OUTSIDE THE FAIR PLAN.
THE STATE IS MAKING SUBSTANTIAL
INVESTMENTS IN THAT FUELS
MITIGATION WORK. CAL FIRE USED
TO JUST RECEIVE A COUPLE $100
MILLION. IT'S BUDGET SEASON NOW,
SO PLEASE LEAN INTO THE
INVESTMENTS. THE STATE IS MADE
IN FUELS MITIGATION. THE STATES
MADE A COMMITMENT THROUGH THE
WILDFIRE TASK FORCE TO GET TO A
HALF MILLION ACRES TREATED WITH
THE FEDS DOING AND ANOTHER HALF
MILLION FOR TOTAL MILLION ACRES
A YEAR. A FEW YEARS AGO, FORMER
GOVERNOR BROWN CAME OUT WITH THE
NATO DECLARATION, SAYING, WE
NEED TO BE DOING 5 MILLION ACRES
OF FUELS MITIGATION A YEAR. SO I
THINK YOU'RE RIGHT, MR JONES.
SORRY THAT, UM, DRIVING THOSE
CONNECTIONS BETWEEN OUR FUELS,
MITIGATION INVESTMENTS AND THE
REDUCTION IN RISK THAT THAT
SHOULD SHOW UP IN RATING PLANS.
IT SHOULD SHOW UP IN THE
DEPOPULATION. PACE AND SCALE OUT
OF THE FAIR PLAN, AND THERE IS A
DIRECT CONNECTION THERE. SO I
ENCOURAGE YOU TO KEEP ON THIS
ISSUE, BUT ALSO DRIVE THOSE, UH
THOSE RELATED ISSUES AND THOSE
FUNDS AND FUELS MITIGATION THAT
WILL HELP SOLVE THIS PROBLEM.
THANK YOU. ALRIGHT UM GOOD
MORNING, MADAM CHAIR KAREN
TAYLOR ON BEHALF OF THE PERSONAL
INSURANCE FEDERATION OF
CALIFORNIA. UM, REALLY WANT TO
THANK ALL THE MEMBERS, THE STAFF
AND THE FAIR PLAN FOR THE
THOUGHTFUL DISCUSSION TODAY?
THIS IS A CRITICALLY IMPORTANT
ISSUES THAT IF LEFT UNADDRESSED,
IT HAS FAR REACHING IMPLICATIONS
FOR THE HEALTH OF THE CALIFORNIA
INSURANCE MARKET. AND OUR
ABILITY TO RESTORE HEALTHY AND
COMPETITIVE MARKET. UM AS YOU
ALL DISCUSSED EARLIER, THE FAIR
PLANS AT RISK EXPOSURE HAS
INCREASED FROM 50 BILLION TO
$310 BILLION TODAY, AND OVER
THAT TIME, INFLATION HAS
INCREASED THE REPLACEMENT COST
FOR FIRE DAMAGED HOMES AS MISS
ROACH TALKED ABOUT THE FAIR PLAN
RATES HAVE NOT KEPT PACE WITH
THAT GROWING RISK. AH WITH THE
LOW LEVEL OF CAPITAL, WHICH
AGAIN I THINK, MR ALVAREZ, MR
WOOD, AND EVERYONE WAS TALKING
ABOUT THE $200 MILLION OF
CAPITAL, THE REINSURANCE
COVERAGE THAT'S FAR BELOW THAT
OF SIMILAR ENTITIES. IT'S
REASONABLE TO EXPECT INSURERS
WILL REDUCE THEIR EXPOSURE TO
THIS UNFUNDED RISK. BY PULLING
BACK FROM THE CALIFORNIA MARKET.
RIGHT THIS IS SORT OF THE GAMBLE
THAT DOCTOR WOULD WAS TALKING
ABOUT. UM TREATING THIS
ASSESSMENT AS FREE REINSURANCE
FOR THE FAIR PAYMENT SIMPLY
PLACES THE FINANCIAL BURDEN ON
INSURERS FOR PROPERTIES. THEY'VE
ALREADY INDICATED THEY CAN'T
ABSORB. UM BEFORE I CLOSE I DID
WANT TO GET TOO. I KNOW
ASSEMBLYMEMBER'S PATTERSON AND I
THINK SEVERAL OF YOU ARE SORT OF
TRYING TO GET AT THIS QUESTION
OF YOU KNOW WHAT HAPPENS TO THE
PRIVATE MARKET AND POLICYHOLDERS
IF THERE IS A SUBSTANTIAL
ASSESSMENT AND I THOUGHT, MAYBE
AN ILLUSTRATIVE EXAMPLE JUST TO
THINK ABOUT THAT. SO IMAGINE
THERE'S A WILDFIRE EVENT THAT
RESULTS IN A $4 BILLION LOSS FOR
THE FAIR PLAN. AFTER A FAIR PLAN
COULD COVER HALF OF THAT RIGHT,
WHICH WOULD BE ABOUT $2 BILLION.
THAT LEAVES A $2 BILLION
ASSESSMENT FOR THE REGULAR
INSURERS TO ABSORB. SO IF AN
INSURER HAS 20% OF THE MARKET
SHARE, THAT WOULD BE $400
MILLION FINANCIAL HIT WHICH
WOULD REDUCE THE INSURERS
REQUIRED RESERVES AND FORCE THAT
CARRIER TO NON RENEW TENS OF
THOUSANDS OF POLICIES. AND THAT
WAS AGAIN I THINK, MR ALVAREZ,
YOU'RE SORT OF GETTING AT HOW
MUCH RESERVE DOES THE FAIR PLAN
HAVE TO HAVE TO COVER THIS
AMOUNT OF EXPOSURE? AND WHILE
THEY DON'T HAVE THAT
REQUIREMENT, ADMITTED MARKET
DOES. THERE IS A WHOLE
REGULATION AND FORMULA. THAT'S
MORE COMPLICATED THAN I CAN
EXPLAIN TO YOU, BUT IT SAYS YOU
HAVE TO HAVE X AMOUNT OF DOLLARS
TO WRITE X AMOUNT OF POLICIES
AND IN STATE FARMS CASE THAT'S
WHAT YOU SAW WHEN THEY HAD TO
PULL BACK FROM THE MARKET. THEIR
CLAIMS. PAYING RESERVE IS LOW
ENOUGH THAT THEY'RE LIKE WE
CAN'T GO RIGHT OTHER POLICIES.
IT DOESN'T MATTER IF YOU HAVE
HIGH FIREPLACE OR EVEN IN AN
URBAN SPOT AT THAT POINT SO YOU
KNOW, THE IRONY OF THAT, OF
COURSE, IS THAT AS THESE
CARRIERS ARE THEN FORCED TO UM
NON RENEWED PEOPLE BECAUSE THEY
GOT HIT WITH AN ASSESSMENT
REDUCES THEIR CLAIMS, PAYING
ABILITY. THOSE PEOPLE THEN GO TO
THE FAIR PLAN, AND YOU CAN SEE
THE CYCLE WHERE THEY GO TO THE
FAIR PLAN. THE EXPOSURE GROWS
AGAIN AND THEN WE GET INTO THIS
VICIOUS CYCLE. AND SO YOU CAN
SEE HOW THIS SPIRALS INTO A FULL
BLOWN CRISIS, SO IT'S IMPORTANT.
THESE FAIR PLAN LIABILITIES BE
CAPPED AT A MANAGEABLE LEVEL,
AND WE WORK COLLABORATIVELY TO
QUICKLY IMPLEMENT THE
COMMISSIONER'S SUSTAINABLE
INSURANCE STRATEGY, AND THAT'S
WHAT'S GONNA GET OUT.
ASSEMBLYMEMBER'S ORTEGA POINT
ABOUT WHERE INSURERS CAN THEN
MAKE THOSE COMMITMENTS TO
DEPOPULATE THE FAIR PLAN AND
RETURNS THE ADMITTED MARKET. SO
THANK YOU. GOOD AFTERNOON, MADAM
CHAIR MEMBERS WANT TO THANK YOU
FOR HOLDING THIS INFORMATIONAL
HEARING. IT'S IMPORTANT. WE
APPRECIATE YOUR COMMITMENT TO
THE SOLVENCY OF THE FAIR PLAN
AND YOUR EFFORTS TO IMPROVE THE
MARKET. WE SUPPORT THE GOALS OF
THE COMMISSIONERS SUSTAINABLE OR
INSURANCE STRATEGY, BUT WE URGED
THE DEPARTMENT TO TAKE IMMEDIATE
ACTION TO IMPLEMENT STRONG,
FINANCIALLY VIABLE REFORMS TO
RESTORE THE SOLVENCY OF THE FAIR
PLAN. AND ELIMINATE THE
OBSTACLES THAT LED TO THIS
CRISIS IN THE FIRST PLACE. THESE
INCLUDE ENSURING RATE ADEQUATE
SEE TO COVER THE COST OF
CONSUMER CLAIMS IN THE EVENT OF
A CATASTROPHIC WILDFIRE,
ACCOUNTING FOR THE COST OF
REINSURANCE AND FAIR PLAN RATE,
MAKING, STREAMLINING THE RATE
MAKING PROCESS AND MINIMIZING
NOT EXPANDING POTENTIAL
LIABILITY FOR INSURERS AND FAIR
PLAN POLICIES THAT THEY HAVE NOT
COLLECTED PREMIUMS FOR ENSURING
THE FAIR PLAN IS ADEQUATELY
RESOURCED TO COVER CONSUMER
CLAIMS WILL REDUCE A SIGNIFICANT
LIABILITY THAT IS A MAJOR DRIVE
BEHIND INSURERS BEING FORCED TO
RESTRICT POLICIES OR ACCEPT
CALIFORNIA ENTIRELY. WE REMAIN
COMMITTED TO WORKING WITH
COMMISSIONER LARA, THE GOVERNOR
OF THE LEGISLATIVE, LEGISLATIVE
LEADERS, BROUGH COMPREHENSIVE
RETURN REFORMS TO ENSURE ALL
CALIFORNIANS HAVE ACCESS TO THE
INSURANCE THEY NEED. THANK YOU.
ADAM GERALD MEMBERS, JOHN
NORWOOD ON BEHALF OF THE
INDEPENDENT INSURANCE AGENTS AND
BROKERS OF CALIFORNIA APPRECIATE
THE OPPORTUNITY TO BE HERE TODAY
. FIRST OF ALL, WE JUST WANT TO
COMMEND THE FAIR PLAN FOR
EVERYTHING THEY'RE DOING TO BE
RELIEF VALVE IN THIS MARKETPLACE
ARE MEMBERS DON'T HAVE MARKETS.
I THINK THE CANARY IN THE MIND
OF BRASS WAS ONE OF OUR BIGGEST
MEMBERS. WHO MAYBE NEVER PLACED
A POLICY WITH THE FAIR PLAN IS
NOW, UM, PLACING 300 POLICIES A
MONTH OR AT LEAST HAVING 300
APPLICATIONS A MONTH, SO WE
DESPERATELY NEED MARKETS.
EVERYBODY ELSE IS LEFT BUT ALSO
SUPPORT THE EXPANSION OF THEIR
FAIR PLAN SO THAT WE DO HAVE
COVERAGE AND MARKET MARKETS TO
PLACE INSURANCE. HOWEVER THIS IS
A DOUBLE EDGED SWORD AS YOU'VE
ALL HEARD AS A FAIR PLAN GROWS,
SO DOES A POSSIBLE ASSESSMENT.
UM AS INDICATED IN THE
BACKGROUND MATERIALS, THERE'S
118 INSURERS, THE RIGHT PROPERTY
INSURANCE IN THE STATE. THERE IS
THE BIG 12 OR MEMBERS RIGHT WITH
SOME OF THOSE COMPANIES, BUT WE
USE A LOT OF THOSE OTHER 100.
THEY HAVE SMALL MARKET SHARES
AND WHEN THEY'RE FACING THIS
TYPE OF POSSIBLE ASSESSMENT,
THAT'S THE REASON WE'RE SEEING.
UM THE COMPANIES PULL OUT OF
PLACES THAT AREN'T EVEN
DISTRESSED, SO THAT'S THE
PROBLEM I SEE IS NOT GOING TO
GET BETTER. IT'S GOING TO GET
WORSE UNLESS WE DEAL WITH THIS
QUICKLY. UM THE OTHER ISSUE JUST
WANT TO RAISE REAL QUICKLY
BECAUSE IT WAS RAISED AS FIRE
RESILIENCY RECALL WHEN THE STATE
AT $100 BILLION SURPLUS THE
AMOUNT OF MONEY THAT WAS
BUDGETED FOR FIRE RESILIENCY WAS
VERY CLOSE TO THE AMOUNT THAT
WAS BUDGETED FOR CLEANUP AROUND
ALONG OUR HIGHWAYS WERE, IT'S
NOT A SEXY ISSUE IS GONNA TAKE
SUSTAINED FUNDING. IT'S GOING TO
BE IN THE HUNDREDS OF MILLIONS
OF BILLIONS OF DOLLARS. AND
THAT'S GOING TO BE A CHALLENGE
FOR THE STATE AS WE GO FORWARD,
LASTLY, ON THE TAKE OUT PLAN
THAT WE HAVE FOR HOMEOWNERS AND
COMMERCIAL INSURANCE, UM IS WE
DON'T DOUBT THE RIGHT NOW. UM
THERE ARE ISSUES BECAUSE NOBODY
IS GOING TO BE TAKING RISKS.
I'LL THE FAIR PLAN. YOU KNOW,
ONCE WE RESTORE THE MARKETPLACE
ONCE WE GET THE TOOLS IN PLACE
FOR COMPANIES TO GET ADEQUATE
RATES, WE THINK THE FOR THE TAKE
OUT PROGRAM. REALLY WON'T BE
NEEDED. BELIEVE ME, THERE'S NO
AGENT OR BROKER THAT WANTS TO
PUT POLICY WITH A FAIR PLAN OR
WITH ANY MARKET MECHANISM THAT
IS FOR, YOU KNOW, HIGH COST
PLANS. SO APPRECIATE THE
OPPORTUNITY TO MAKE THOSE
COMMENTS AND THANK THANK YOU
VERY MUCH. MADAM CHAIR,
REMEMBERS DAN DONE WIRE WITH THE
CALIFORNIA BUILDING INDUSTRY
ASSOCIATION, WHERE THE
ASSOCIATION THAT REPRESENTS
HOMEBUILDERS. ONE. THANK YOU
VERY MUCH FOR HOLDING THE STRAIN
TODAY AND THANK YOU FOR
CONTINUING TO BRING LIGHT TO
THIS VERY IMPORTANT ISSUE, AS
WAS NOTED, UM, WE BUILD 85% OF
THE HOUSING UNITS IN THE STATE
THAT INCLUDES AFFORDABLE MARKET
RATE APARTMENTS. AND THE BIG
ISSUE FOR US IS CONDOMINIUMS. UM
REALLY WANT TO RECOGNIZE THAT
WE'RE STILL NOT BUILDING VERY
MANY CONDOS IN THE STATE OF
CALIFORNIA LAST YEAR, 10,000 SAT
ON HOLD SO WE REALLY APPRECIATE
THE FACT THAT THE FAIR PLAN HAS
CREATED 20 MILLION PER LOCATION.
WE'RE STARTING TO USE THAT IN
OUR SMALLER PROJECTS AND REALLY
APPRECIATE THE CEOS EFFORTS ON
20 MILLION PER BUILDING, WHICH
CREATES THE LAYER CAKE THAT
VICTORIA OUTLINED FOR US. THIS
IS A VERY IMPORTANT ISSUE TO
ADDRESSING OUR HOUSING CRISIS AS
WELL AS THE INSURANCE CRISIS,
AND WE LOOK FORWARD TO
PARTNERING WITH THE COMMITTEE
AND COMING UP WITH THESE
SOLUTIONS. WE ALSO WANT TO MAKE
IT VERY CLEAR WE FULLY AND
WHOLLY SUPPORT THE
COMMISSIONER'S PLAN TO ADDRESS
ISSUES IN A LONG TERM BASIS ARE
ONLY ISSUES, THE TIMING AND THE
SEQUENCING AND THE FAIR PLAN
HAVING TO STEP IN THE GAP, BUT
IF ALL THOSE ISSUES ARE
IMPLEMENTED, IT WILL CREATE A
MORE STABLE MARKET AND ALL WE
WOULD URGE IS THAT MOVE AS
QUICKLY AS POSSIBLE. MADAM CHAIR
MEMBERS. THANK YOU. THANK YOU.
BECAUSE OF FAIR PLAN IS NOT
UNDER THE PROVISIONS OF PROP 103
THIS ASSOCIATION IS THE PATH OF
LEAST RESISTANCE. SOLUTIONS
EXPANDING THE FAIR PLAN, FILL AN
IMPORTANT NEED AND PURPOSE WHEN
THE INSURANCE MARKET IS IN
TURMOIL. BUT THEY SHOULD BE
CONSIDERED TEMPORARY.
CALIFORNIA'S INSURANCE MARKET
NEEDS TO BE FIXED AND THE FAIR
PLAN NEEDS TO RETURN TO ITS
PURPOSE IS CALIFORNIA'S INSURER
OF LAST RESORT. I LOOK FORWARD
TO CONTINUING TO MONITOR THE
FAIR PLAN AS WELL AS THE
PROGRESS OF THE SUSTAINABLE
INSURANCE STRATEGY. AND AGAIN. I
WANT TO THANK YOU FOR BEING HERE
TODAY, AND I WANT TO THANK
COMMITTEE MEMBERS FOR YOUR
PARTICIPATION IN YOUR GOOD
QUESTIONS, AND IT ALSO LIKE TO
THANK THE PUBLIC FOR BEING HERE
TODAY.